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On green production taxes

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  • Edward Calthrop

Abstract

Proposals are often made to tax goods which are environmentally damaging. Many such goods are consumed both directly by households and industry at large: for example, carbon-intensive fuel, waste water or congested road space. This paper adopts a tax-reform setting to evaluate such a policy. The welfare impact is shown to depend on an input-substitution effect and an output effect on final consumption, where the latter effect can be conveniently analysed via the standard concept of the marginal welfare cost of a commodity tax. Finally, it is shown that raising a production tax is welfare enhancing if the current tax is below marginal external cost and revenues are recycled via the commodity tax with the highest marginal welfare cost.

Suggested Citation

  • Edward Calthrop, 2003. "On green production taxes," Economics Series Working Papers 158, University of Oxford, Department of Economics.
    • Handle: RePEc:oxf:wpaper:158
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    References listed on IDEAS

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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Soviet and Russian Inequality: Was the Soviet System Pro-Poor? by Mark Harrison
      by Mark Harrison in Mark Harrison's blog on 2017-10-13 13:44:00

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    More about this item

    Keywords

    externality taxes; productive efficiency; tax reform;
    All these keywords.

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis

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