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The Impact of EC Nitrogen Taxes on Agricultural Competitiveness and Welfar: Simulations with the World Trade Model TEPSIM

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  • Hartmann, Monika

Abstract

In this paper the attempt is made to estimate the trade and welfare effects of nitrogen taxes in the European Community. The world trade simulation model TEPSIM was developed for this purpose. TEPSIM differs from conventional agricultural trade models in that it is not limited to agricultural output markets but explicitly considers 12 agricultural inputs. Thus, the model is not only suitable for the simulation of environmental policies in agriculture but also gives valuable insights into the intensification and specialization effects of current agricultural policy reforms. The results of the study reveal that the implementation of nitrogen taxes in the EC would lead to a loss in comparative advantage for agriculture in Europe. At the same time this policy would induce conventional welfare gains in the EC if the tax level did not exceed 44 percent. However, at that tax level the relative change in mineral nitrogen demand would be very low ( 13.5 percent). Higher nitrogen taxes, on the other hand, would induce net welfare losses in the Community. While these losses would increase exponentially with the tax rate, the decline in nitrogen use is not even linear. Thus, the implementation of extreme taxes would have high economic costs without inducing profound improvements in the ecological area.

Suggested Citation

  • Hartmann, Monika, 1997. "The Impact of EC Nitrogen Taxes on Agricultural Competitiveness and Welfar: Simulations with the World Trade Model TEPSIM," 1997 Occasional Paper Series No. 7 198205, International Association of Agricultural Economists.
  • Handle: RePEc:ags:iaaeo7:198205
    DOI: 10.22004/ag.econ.198205
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    File URL: http://ageconsearch.umn.edu/record/198205/files/agecon-occpapers-1997-045_1_.pdf
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    References listed on IDEAS

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    1. Haley, Stephen L., 1988. "Joint Products In The Swopsim Modeling Framework," Staff Reports 278136, United States Department of Agriculture, Economic Research Service.
    2. Gardiner, Walter H. & Roningen, Vernon O. & Liu, Karen, 1989. "Elasticities In The Trade Liberalization Database," Staff Reports 278197, United States Department of Agriculture, Economic Research Service.
    3. Haley, Stephen L., 1993. "Environmental And Agricultural Policy Linkages In The European Community: The Nitrate Problem And Cap Reform," Working Papers 51117, International Agricultural Trade Research Consortium.
    4. Boyle, G E & O'Neill, D, 1990. "The Generation of Output Supply and Input Demand Elasticities for a Johansen-Type Model of the Irish Agricultural Sector," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 17(4), pages 387-405.
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