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Energy Tax Exemptions and Industrial Production

Author

Listed:
  • Andreas Gerster

    (Hochschule Mannheim - University of Applied Sciences)

  • Stefan Lamp

    (TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - Comue de Toulouse - Communauté d'universités et établissements de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

Abstract

This paper investigates the impact of a large electricity tax exemption on production levels, employment, and input choices in the German manufacturing industry. For two policy designs, we show that exempted plants increase their electricity use. This effect is larger under a notched exemption policy, where passing an eligibility threshold yields infra-marginal benefits, compared to a policy without such benefits. We detect no significant impact of the exemptions on production levels, export shares, and employment. Using counterfactual simulations, we document that notched policies substantially distort firms' production input choices when financial stakes are high and compliance costs are low.

Suggested Citation

  • Andreas Gerster & Stefan Lamp, 2024. "Energy Tax Exemptions and Industrial Production," Post-Print hal-04628135, HAL.
    • Handle: RePEc:hal:journl:hal-04628135
    DOI: 10.1093/ej/ueae048
    as

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    Cited by:

    1. Pier Basaglia & Sophie M. Behr & Moritz A. Drupp, 2023. "De-Fueling Externalities: How Tax Salience and Fuel Substitution Mediate Climate and Health Benefits," Discussion Papers of DIW Berlin 2041, DIW Berlin, German Institute for Economic Research.
    2. Pier Basaglia & Sophie M. Behr & Moritz A. Drupp & Piero Basaglia, 2023. "De-Fueling Externalities: Causal Effects of Fuel Taxation and Mediating Mechanisms for Reducing Climate and Pollution Costs," CESifo Working Paper Series 10508, CESifo.
    3. Alessia Camplomi & Harald Fadinger & Chiara Forlati & Sabine Stillger & Ulrich J. Wagner, 2024. "Designing Effective Carbon Border Adjustment with Minimal Information Requirements: Theory and Evidence," CRC TR 224 Discussion Paper Series crctr224_2024_495v3, University of Bonn and University of Mannheim, Germany, revised Jul 2025.

    More about this item

    Keywords

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    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices

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