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Energy Taxes as a Signaling Device: An Empirical Analysis of Consumer Preferences

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  • Ghalwash, Tarek

    (Department of Economics, Umeå University)

Abstract

This paper presents an econometric study dealing with household demand in Sweden. The main objective is to empirically examine the differences in consumer reaction to the introduction of, or the change, in environmental taxes. Main focus is on environmental taxes as a signaling device. The hypothesis is that the introduction of an environmental tax provides new information about the properties of the directly taxed goods. This in turn may affect consumer preferences for these goods, hence altering the consumption choice. The result from the econometric analysis shows that all goods have negative own-price elasticities, and positive income elasticities. Concerning the signalling effect of environmental taxes the results are somewhat ambiguous. The tax elasticity for energy goods used for heating seems to be significantly higher than the traditional price elasticity, whereas the opposite seems to be the case for energy goods used for transportation.

Suggested Citation

  • Ghalwash, Tarek, 2004. "Energy Taxes as a Signaling Device: An Empirical Analysis of Consumer Preferences," Umeå Economic Studies 646, Umeå University, Department of Economics.
    • Handle: RePEc:hhs:umnees:0646
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    References listed on IDEAS

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    Cited by:

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    2. Mihaela NICOLAU, 2010. "The influence of taxation on energy products price and consequences on the global economy," EuroEconomica, Danubius University of Galati, issue 24, pages 99-109, March.
    3. Vera, Sonia & Sauma, Enzo, 2015. "Does a carbon tax make sense in countries with still a high potential for energy efficiency? Comparison between the reducing-emissions effects of carbon tax and energy efficiency measures in the Chile," Energy, Elsevier, vol. 88(C), pages 478-488.
    4. Waidler, Jennifer, 2016. "On the fungibility of public and private transfers: A mental accounting approach," MERIT Working Papers 2016-060, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    5. Di Cosmo, Valeria & Hyland, Marie, 2013. "Carbon tax scenarios and their effects on the Irish energy sector," Energy Policy, Elsevier, vol. 59(C), pages 404-414.
    6. Susan Xu Tang & David L. Sjoquist, 2019. "Differential Effects of Federal and State Gasoline Taxes on Gasoline Consumption," Hacienda Pública Española / Review of Public Economics, IEF, vol. 229(2), pages 11-32, June.
    7. Mao Xianqiang & Yang Shuqian & Liu Qin, 2013. "The Way to CO2 Emission Reduction and the Co-benefits of Local Air Pollution Control in China's Transportation Sector: A Policy and Economic Analysis," EEPSEA Research Report rr2013036, Economy and Environment Program for Southeast Asia (EEPSEA), revised Mar 2013.
    8. Baranzini, Andrea & Weber, Sylvain, 2013. "Elasticities of gasoline demand in Switzerland," Energy Policy, Elsevier, vol. 63(C), pages 674-680.
    9. Silvia Tiezzi & Stefano F. Verde, 2019. "The signaling effect of gasoline taxes and its distributional implications," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 17(2), pages 145-169, June.
    10. Andrea Kollmann & Friedrich Schneider, 2010. "Why Does Environmental Policy in Representative Democracies Tend to Be Inadequate? A Preliminary Public Choice Analysis," Sustainability, MDPI, vol. 2(12), pages 1-25, November.
    11. Brännlund, Runar & Lundgren, Tommy & Marklund, Per-Olov, 2014. "Carbon intensity in production and the effects of climate policy—Evidence from Swedish industry," Energy Policy, Elsevier, vol. 67(C), pages 844-857.
    12. Yasushi Ito, 2012. "The effects of carbon/energy taxes on R&D expenditure in Sweden," Chapters, in: Larry Kreiser & Ana Yábar Sterling & Pedro Herrera & Janet E. Milne & Hope Ashiabor (ed.), Carbon Pricing, Growth and the Environment, chapter 14, pages 220-229, Edward Elgar Publishing.
    13. Maria Alice Moz-Christofoletti & Paula Carvalho Pereda, 2021. "Winners and losers: the distributional impact of a carbon tax in Brazil," Working Papers, Department of Economics 2021_08, University of São Paulo (FEA-USP).
    14. Oikonomou, Vlasis & Jepma, Catrinus & Becchis, Franco & Russolillo, Daniele, 2008. "White Certificates for energy efficiency improvement with energy taxes: A theoretical economic model," Energy Economics, Elsevier, vol. 30(6), pages 3044-3062, November.
    15. Webster, Allan & Ayatakshi, Sukanya, 2013. "The effect of fossil energy and other environmental taxes on profit incentives for change in an open economy: Evidence from the UK," Energy Policy, Elsevier, vol. 61(C), pages 1422-1431.
    16. Bashmakov, Igor, 2007. "Three laws of energy transitions," Energy Policy, Elsevier, vol. 35(7), pages 3583-3594, July.
    17. Silvia Tiezzi & Stefano F. Verde, 2019. "The signaling effect of gasoline taxes and its distributional implications," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 17(2), pages 145-169, June.
    18. Mihaela Simionescu & Carmen Beatrice Păuna & Mihaela-Daniela Vornicescu Niculescu, 2021. "The Relationship between Economic Growth and Pollution in Some New European Union Member States: A Dynamic Panel ARDL Approach," Energies, MDPI, vol. 14(9), pages 1-17, April.
    19. Silvia Tiezzi & Stefano F. Verde, 2017. "The signaling effect of gasoline taxes and its distributional implications," RSCAS Working Papers 2017/06, European University Institute.
    20. Stéphane Poncin, 2018. "Energy policy tools in Luxembourg - Assessing their impact on households’ space heating energy consumption and CO2 emissions by means of the LuxHEI model," DEM Discussion Paper Series 18-23, Department of Economics at the University of Luxembourg.

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    More about this item

    Keywords

    Household demand; energy tax; tax elasticities; emissions;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices

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