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Outcomes of a Swedish Kilometre Tax. An analysis of Economic Effects and Effects on NOx Emissions

Author

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  • Östblom, Göran

    () (National Institute of Economic Research)

  • Hammar, Henrik

    (National Institute of Economic Research)

Abstract

By using an applied general equilibrium model of the Swedish economy, this paper examines how an in-troduction of a kilometre tax will affect economic growth (GDP), industry structure and emission levels of nitrogen oxides (NOx). According to our findings, the GDP will decrease by 0.1-0.3 per cent and NOx emissions by 0.4-0.8 per cent (assuming fixed emissions coefficients) during the 2006-2020 period. Thus, we find that economic growth and NOx emissions decouple due to an introduction of a kilometre tax. The projected reductions of NOx emissions are, however, minor relative to the Swedish objective for 2010. Road transports will overall be substituted by sea and rail transports and industry structure will change in favour of industries less dependent on heavy road transports. The emissions reductions will, however, be substantively larger if the kilometre tax also ends up inducing technological development able to expedite the adoption of cleaner vehicles. Consequently, this would reinforce the decoupling effect. Furthermore, we compare our findings with the results of others, who used partial equilibrium or bottom-up approaches to study the effects of a Swedish kilometre tax. The effects on production are more signifi-cant in the applied general equilibrium framework, but structural changes point in the same direction for all the studies compared.

Suggested Citation

  • Östblom, Göran & Hammar, Henrik, 2007. "Outcomes of a Swedish Kilometre Tax. An analysis of Economic Effects and Effects on NOx Emissions," Working Papers 103, National Institute of Economic Research.
  • Handle: RePEc:hhs:nierwp:0103
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    References listed on IDEAS

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    1. Dixon, Peter B. & Parmenter, B.R., 1996. "Computable general equilibrium modelling for policy analysis and forecasting," Handbook of Computational Economics,in: H. M. Amman & D. A. Kendrick & J. Rust (ed.), Handbook of Computational Economics, edition 1, volume 1, chapter 1, pages 3-85 Elsevier.
    2. J. A. Mirrlees, 1971. "An Exploration in the Theory of Optimum Income Taxation," Review of Economic Studies, Oxford University Press, vol. 38(2), pages 175-208.
    3. Lawrence H. Goulder, 1998. "Environmental Policy Making in a Second-Best Setting," Journal of Applied Economics, Universidad del CEMA, vol. 1, pages 279-328, November.
    4. Kremers, Hans & Nijkamp, Peter & Rietveld, Piet, 2002. "A meta-analysis of price elasticities of transport demand in a general equilibrium framework," Economic Modelling, Elsevier, vol. 19(3), pages 463-485, May.
    5. Diamond, Peter A & Mirrlees, James A, 1971. "Optimal Taxation and Public Production II: Tax Rules," American Economic Review, American Economic Association, vol. 61(3), pages 261-278, June.
    6. Östblom, Göran, 1999. "An Environmental Medium Term Economic Model - EMEC," Working Papers 69, National Institute of Economic Research.
    7. Bergman, Lars, 2005. "CGE Modeling of Environmental Policy and Resource Management," Handbook of Environmental Economics,in: K. G. Mäler & J. R. Vincent (ed.), Handbook of Environmental Economics, edition 1, volume 3, chapter 24, pages 1273-1306 Elsevier.
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    Citations

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    Cited by:

    1. Henrik Hammar & Tommy Lundgren & Magnus Sjostrom & Matts Andersson, 2011. "The kilometer tax and Swedish industry-effects on sectors and regions," Applied Economics, Taylor & Francis Journals, vol. 43(22), pages 2907-2917.
    2. Bohlin, Lars, 2010. "SAINT – a Standardized CGE-model for Analysis of Indirect Taxation," Working Papers 2010:6, Örebro University, School of Business.

    More about this item

    Keywords

    static general equilibrium model; EMEC; partial equilibrium model; bottom-up models; kilometre tax; transport policy; environmental policy;

    JEL classification:

    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • D20 - Microeconomics - - Production and Organizations - - - General
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • R48 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Government Pricing and Policy

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