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Environmental Tax on Products and Services Based on Their Carbon Footprint: A Case Study of the Pulp and Paper Sector

Listed author(s):
  • Gemechu, Eskinder D.
  • Butnar, Isabela
  • Llop Llop, Maria
  • Castells i Piqué, Francesc

The main aim of this work is to define an environmental tax on products and services based on their carbon footprint. We examine the relevance of conventional life cycle analysis (LCA) and environmentally extended input-output analysis (EIO) as methodological tools to identify emission intensities of products and services on which the tax is based. The short-term price effects of the tax and the policy implications of considering non-GHG are also analyzed. The results from the specific case study on pulp production show that the environmental tax rate based on the LCA approach (1,8%) is higher than both EIO approaches (0,8% for product and 1,4% for industry approach), but they are comparable. Even though LCA is more product specific and provides detailed analysis, EIO would be the more relevant approach to apply economy wide environmental tax. When the environmental tax considers non-GHG emissions instead of only CO2, sectors such as agriculture, mining of coal and extraction of peat, and food exhibit higher environmental tax and price effects. Therefore, it is worthwhile for policy makers to pay attention on the implication of considering only CO2 tax or GHG emissions tax in order for such a policy measure to be effective and meaningful. Keywords: Environmental tax; Life cycle analysis; Environmental input-output analysis.

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File URL: http://hdl.handle.net/2072/182644
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Paper provided by Universitat Rovira i Virgili, Department of Economics in its series Working Papers with number 2072/182644.

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Date of creation: 2012
Handle: RePEc:urv:wpaper:2072/182644
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  1. Jaffe Adam B. & Stavins Robert N., 1995. "Dynamic Incentives of Environmental Regulations: The Effects of Alternative Policy Instruments on Technology Diffusion," Journal of Environmental Economics and Management, Elsevier, vol. 29(3), pages 43-63, November.
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  4. Creedy, John & Sleeman, Catherine, 2006. "Carbon taxation, prices and welfare in New Zealand," Ecological Economics, Elsevier, vol. 57(3), pages 333-345, May.
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  6. Miller,Ronald E. & Blair,Peter D., 2009. "Input-Output Analysis," Cambridge Books, Cambridge University Press, number 9780521739023, October.
  7. Suh, Sangwon, 2004. "Functions, commodities and environmental impacts in an ecological-economic model," Ecological Economics, Elsevier, vol. 48(4), pages 451-467, April.
  8. Sir Nicholas Stern, 2006. "What is the Economics of Climate Change?," World Economics, World Economics, 1 Ivory Square, Plantation Wharf, London, United Kingdom, SW11 3UE, vol. 7(2), pages 1-10, April.
  9. Bullard, Clark W. & Penner, Peter S. & Pilati, David A., 1978. "Net energy analysis : Handbook for combining process and input-output analysis," Resources and Energy, Elsevier, vol. 1(3), pages 267-313, November.
  10. Don Fullerton & Andrew Leicester & Stephen Smith, 2008. "Environmental Taxes," NBER Working Papers 14197, National Bureau of Economic Research, Inc.
  11. Shilpa Rao and Keywan Riahi, 2006. "The Role of Non-CO2 Greenhouse Gases in Climate Change Mitigation: Long-term Scenarios for the 21st Century," The Energy Journal, International Association for Energy Economics, vol. 0(Special I), pages 177-200.
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