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The polluter-doesn't-pay principle

Author

Listed:
  • Ralf Martin
  • Ulrich J. Wagner
  • Laure B. de Preux

Abstract

By granting discounts on environmental taxes to heavy polluting firms, the government is missing out on significant tax revenues and achieving considerably less in reducing greenhouse gas emissions. That is the central conclusion of research by Ralf Martin and colleagues, which reveals the failings of the UK's climate change levy. Their study shows that firms that enjoy a discount from the levy, claiming that such measures damage their ability to compete in the global economy, do not in fact face higher risks to their competitiveness. Firms that pay the full climate change levy reduce their energy use and their emissions by more than those that get a tax discount.

Suggested Citation

  • Ralf Martin & Ulrich J. Wagner & Laure B. de Preux, 2012. "The polluter-doesn't-pay principle," CentrePiece - The Magazine for Economic Performance 369, Centre for Economic Performance, LSE.
  • Handle: RePEc:cep:cepcnp:369
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    File URL: http://cep.lse.ac.uk/pubs/download/cp369.pdf
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    More about this item

    Keywords

    Industry compensation; industrial relocation; emissions trading; permit allocation; EUETS; firm data;

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Adoption and Costs; Distributional Effects; Employment Effects
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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