IDEAS home Printed from https://ideas.repec.org/p/nbr/nberwo/4582.html
   My bibliography  Save this paper

Energy Taxes: Traditional Efficiency Effects and Environmental Implications

Author

Listed:
  • Lawrence H. Goulder

Abstract

This paper examines 'traditional' (non-environmental) efficiency consequences and environmental effects of two energy tax policies: a tax on fossil and synthetic fuels based on Btu (or energy) content and a tax on consumer purchases of gasoline. It uses a model that uniquely combines attention to details of the U.S. tax system with a consolidated treatment of U.S. energy use and pollution emissions. On traditional efficiency grounds, each of the energy taxes emerges as more costly to the economy than increases in personal or corporate income taxes of equal revenue yield. Simulation experiments indicate that the excess costs of energy taxes are due partly to their relatively narrow tax base. The Btu tax's application to gross output (as compared with net output under an income tax) serves to expand its excess costs; in contrast, the gasoline tax's focus on consumption (as opposed to income) tends to mitigate its excess costs. On the environmental side, we find that for each of eight major air pollutants considered, energy taxes induce emissions reductions that are at least nine times larger than the reductions under the income tax alternatives. Overall, this study indicates that the Btu and gasoline taxes considered are inferior to the alternatives on narrow efficiency grounds but superior on environmental grounds. Whether the environmental attractions of energy taxes are large enough to offset their relatively high non-environmental costs remains an open question.

Suggested Citation

  • Lawrence H. Goulder, 1993. "Energy Taxes: Traditional Efficiency Effects and Environmental Implications," NBER Working Papers 4582, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:4582
    Note: PE EEE
    as

    Download full text from publisher

    File URL: http://www.nber.org/papers/w4582.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. J. E. Stiglitz & P. Dasgupta, 1971. "Differential Taxation, Public Goods, and Economic Efficiency," Review of Economic Studies, Oxford University Press, vol. 38(2), pages 151-174.
    2. Goulder, Lawrence H., 1989. "Tax policy, housing prices, and housing investment," Regional Science and Urban Economics, Elsevier, vol. 19(2), pages 281-304, May.
    3. Nordhaus, William D, 1991. "To Slow or Not to Slow: The Economics of the Greenhouse Effect," Economic Journal, Royal Economic Society, vol. 101(407), pages 920-937, July.
    4. Stiglitz, Joseph E., 1976. "The corporation tax," Journal of Public Economics, Elsevier, vol. 5(3-4), pages 303-311.
    5. Angus Deaton, 1979. "The Distance Function in Consumer Behaviour with Applications to Index Numbers and Optimal Taxation," Review of Economic Studies, Oxford University Press, vol. 46(3), pages 391-405.
    6. Peter A. Diamond & J. A. Mirrlees, 1968. "Optimal Taxation and Public Production," Working papers 22, Massachusetts Institute of Technology (MIT), Department of Economics.
    7. repec:fth:harver:1424 is not listed on IDEAS
    8. Julio I. Rotemberg & Michael Woodford, 1994. "Energy Taxes and Aggregate Economic Activity," NBER Chapters, in: Tax Policy and the Economy, Volume 8, pages 159-195, National Bureau of Economic Research, Inc.
    9. Lawrence H. Summers, 1981. "Taxation and Corporate Investment: A q-Theory Approach," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 12(1), pages 67-140.
    10. Lawrence H. Goulder, 1989. "Tax Policy, Housing Prices, and Housing Investment," NBER Working Papers 2814, National Bureau of Economic Research, Inc.
    11. James M. Poterba, 1993. "Global Warming Policy: A Public Finance Perspective," Journal of Economic Perspectives, American Economic Association, vol. 7(4), pages 47-63, Fall.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Raúl O'Ryan & Sebastian Miller & Carlos J. de Miguel, 2001. "Environmental Taxes, Inefficient Subsidies and Income Distribution in Chile: A CGE framework," Documentos de Trabajo 98, Centro de Economía Aplicada, Universidad de Chile.
    2. Hahn, Robert & Passell, Peter, 2010. "The economics of allowing more U.S. oil drilling," Energy Economics, Elsevier, vol. 32(3), pages 638-650, May.
    3. Antonia Diaz & Luis A. Puch & Maria D. Guillo, 2004. "Costly Capital Reallocation and Energy Use," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 7(2), pages 494-518, April.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Goulder, Lawrence H. & Thalmann, Philippe, 1993. "Approaches to efficient capital taxation : Leveling the playing field vs. living by the golden rule," Journal of Public Economics, Elsevier, vol. 50(2), pages 169-196, February.
    2. Okumura, Tsunao, 1997. "Housing Investment and Residential Land Supply in Japan: An Asset Market Approach," Journal of the Japanese and International Economies, Elsevier, vol. 11(1), pages 27-54, March.
    3. A. Lans Bovenberg & Lawrence H. Goulder, 1995. "Costs of Environmentally Motivated Taxes in the Presence of Other Taxes:General Equilibrium Analyses," NBER Working Papers 5117, National Bureau of Economic Research, Inc.
    4. Donald Bruce & William Fox & Matthew Murray, 2003. "To Tax Or Not To Tax? The Case Of Electronic Commerce," Contemporary Economic Policy, Western Economic Association International, vol. 21(1), pages 25-40, January.
    5. Zhicheng Zhou & Prapatchon Jariyapan, 2013. "The impact of macroeconomic policies to real estate market in People's Republic of China," The Empirical Econometrics and Quantitative Economics Letters, Faculty of Economics, Chiang Mai University, vol. 2(3), pages 75-92, September.
    6. António Afonso & Vítor Gaspar, 2006. "Excess burden and the cost of inefficiency in public services provision," Working Papers w200609, Banco de Portugal, Economics and Research Department.
    7. Keuschnigg, Christian & Nielsen, Soren Bo, 1996. "Housing markets and vacant land," Journal of Economic Dynamics and Control, Elsevier, vol. 20(9-10), pages 1731-1762.
    8. Alberto Petrucci, 2010. "Second-Best Optimal Taxation of Oil and Capital in a Small Open Economy," Working Papers 2010.20, Fondazione Eni Enrico Mattei.
    9. Robinson, James A. & Srinivasan, T.N., 1993. "Long-term consequences of population growth: Technological change, natural resources, and the environment," Handbook of Population and Family Economics, in: M. R. Rosenzweig & Stark, O. (ed.), Handbook of Population and Family Economics, edition 1, volume 1, chapter 21, pages 1175-1298, Elsevier.
    10. Skinner, Jonathan, 1996. "The dynamic efficiency cost of not taxing housing," Journal of Public Economics, Elsevier, vol. 59(3), pages 397-417, March.
    11. Will Martin & James E. Anderson, 2005. "Costs of Taxation and the Benefits of Public Goods: The Role of Income Effects," Boston College Working Papers in Economics 617, Boston College Department of Economics.
    12. Mireille Chiroleu-Assouline & Mouez Fodha, 2011. "Verdissement de la fiscalité. À qui profite le double dividende ?," Revue de l'OFCE, Presses de Sciences-Po, vol. 0(1), pages 409-431.
    13. Anderson, John E. & Roy, Atrayee Ghosh, 2001. "Eliminating Housing Tax Preferences: A Distributional Analysis," Journal of Housing Economics, Elsevier, vol. 10(1), pages 41-58, March.
    14. Lundholm, Michael & Wijkander, Hans, 2002. "Public Ownership and Income Redistribution," Research Papers in Economics 2003:2, Stockholm University, Department of Economics.
    15. Kenneth L. Judd, 1997. "The Optimal Tax Rate for Capital Income is Negative," NBER Working Papers 6004, National Bureau of Economic Research, Inc.
    16. Andrea J. Heuson & Gary Painter, 2011. "The Impact of the Taxpayer Relief Act of 1997 on Housing Turnover in the U.S. Single Family Residential Market," Working Paper 8509, USC Lusk Center for Real Estate.
    17. Eskeland, Gunnar S., 2000. "Environmental protection and optimal taxation," Policy Research Working Paper Series 2510, The World Bank.
    18. Mireille Chiroleu-Assouline, 2001. "Le double dividende. Les approches théoriques," Revue Française d'Économie, Programme National Persée, vol. 16(2), pages 119-147.
    19. Parry, Ian W. H. & Williams, Roberton III & Goulder, Lawrence H., 1999. "When Can Carbon Abatement Policies Increase Welfare? The Fundamental Role of Distorted Factor Markets," Journal of Environmental Economics and Management, Elsevier, vol. 37(1), pages 52-84, January.
    20. Stiglitz, Joseph E & Boskin, Michael J, 1977. "Some Lessons from the New Public Finance," American Economic Review, American Economic Association, vol. 67(1), pages 295-301, February.

    More about this item

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:4582. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: . General contact details of provider: https://edirc.repec.org/data/nberrus.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (email available below). General contact details of provider: https://edirc.repec.org/data/nberrus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.