how do market reforms affect china s responsiveness to environmental policy a large percentage of total investment in china is allocated by the central government at below market interest rates in pursuit of non economic objectives this has resulted in low rates of return and a high number of non performing loans threatening the future health of the chinese economy as a result reform of capital markets is a high priority of the chinese government at the same time the country is implementing various environmental policies to deal with serious pollution issues in this paper we ask how reforms of the capital market will affect the functioning of a carbon tax this allows us to assess how china s willingness to join global efforts to reduce carbon emissions is influenced by china s current efforts to reduce investment subsidies we compare the costs of a carbon tax in a reformed economy with the costs of a carbon tax in the current subsidized economy we find that in the subsidized economy the tax interaction effect dampens the effect of a carbon tax resulting in smaller reductions in emissions than what would result in a reformed economy importantly we also find that the effect on economic welfare from a carbon tax is lower in the subsidized economy in fact for lower levels of reductions the carbon tax is actually welfare improving these results have important implications for an economy undergoing economic transition the carbon tax rate required to achieve a certain level of emission reductions will be higher in an economy with capital subsidies however the welfare implications of the tax indicate that the current system with capital subsidies is highly distorting implying that there is a high efficiency cost for the non economic objectives the government is pursuing by maintaining this system of subsidies

are environmental taxes a free lunch issues in modelling the macroeconomic effects of carbon taxes applied analysis of output and employment effects from revenue neutral environmental taxation depends critically on how the supply side of the economy is modelled despite the long history of theoretical and computable general equilibrium supply side models the empirical basis of much of this work has been quite weak until recently however most econometric attempts to capture factor substitution effects have not been based on theoretically consistent structures this paper examines the methodological issues that underlie these problems and compares the results of imposing environmental taxes in two different econometric modelling structures the implications of theories of endogenous technical progress on the simulation properties of such models are discussed and a simple empirically based model that embodies some of these features is presented

outcomes of voting and planning condorcet weber and rawls locations abstract the paper is concerned with the comparison of the locations of a facility resulting from voting and planning procedures it is shown that a voting location exists and coincides with that minimizing the total distance covered by the users to go to the facility when the transportation network contains no cycles for a general network least upper bounds on the ratio of the social values of the voting and planning locations are given in the cases where the total or the maximal travelled distance is minimized

on cost benefit rules for green taxes this paper concerns the welfare effects of a green tax reform in a dynamic general equilibrium model with preexisting taxes on labor income and capital income in comparison with previous studies on green taxes in dynamic models which have focused their main attention on long run effects of such reforms i derive cost benefit rules for a change in the tax mix by using the properties of the value function in optimal control theory this enables me to relate the welfare effect of a change in the tax mix to responses in employment the capital stock flow emissions and the stock of pollution along the whole general equilibrium path another contribution of the paper is to examine under what conditions an emission tax which is set permanently below the marginal damage of pollution is welfare superior to an emission tax path that fully internalizes the external effect

efficient environmental taxation under worker firm bargaining we study an economy with free firm entry and unemployment due to firm worker bargaining over each firm s surplus and where firms cause pollution that can be reduced by initial investments an uncompensated increase in the pollution tax reduces pollution but increases unemployment implying a tradeoff between the two when tax revenues are used to subsidize either firms hiring or investments employment may also increase creating a double dividend from the pollution tax a pollution tax increase used to subsidize current employment is always less effective than a hiring subsidy and is totally ineffective when subsidies equal pollution tax revenues for each individual firm we show that the hypothetical pollution tax implementing the first best solution exceeds the pigouvian tax the second best tax exceeds this first best tax when we have a double dividend and is below it when we do not

how to improve the performance of carbon tax in china abstract the chinese government committed to controlling carbon dioxide co 2 emissions and promoting development of non fossil fuels thus it becomes a top priority for the government to develop effective climate policies against such background this paper develops a new multi country computable general equilibrium cge model with detailed energy disaggregation this study evaluates the impact of single policy instrument carbon tax and combined policy mixes in order to investigate driving factors affecting the policy performance the main findings are as follows firstly the driving factors can be classified into two types the first type of factors affects cost effectiveness significantly while the second type generates considerable effect on emission performance secondly cross border externalities function as important barriers to the co 2 emission reduction since they imply extra competitiveness loss and result in considerable carbon leakage finally this paper considers two integrated policy mixes wherein carbon tax revenue is recycled to reduce capital tax or support clean energy subsidy these policy mixes can improve both cost effectiveness and emission performance and thus perform better than carbon tax alone in this way carbon tax revenue can be used to improve the performance looking ahead complicated policy mixes are preferred to improve the performance of china s carbon tax

optimal environmental charges taxes easy to estimate and surplus yielding the estimation of the optimal charges taxes on environmental disruption and the financing of the spending on the abatement of environmental disruption are important practical problems this paper shows that for most cases where some abatement is desirable both the estimation and the financing problems may be easily solved it is desirable to charge disruption at least at the marginal cost of abatement which is easier to estimate than the marginal damage of disruption and such a charge will normally yield total revenue in excess of the amount of abatement spending

commuting transport tax reform and the labour market employer paid parking and the relative efficiency of revenue recycling instruments in this paper the welfare effects of a budget neutral increase in taxes on car commuters are studied in a model that takes into account the presence of employer paid parking at the workplace it is found that the presence of employer paid parking substantially increases the welfare effect of such a tax reform independent of the use of the revenues congestion taxes not only correct congestion externalities they also reduce the inefficiency caused by employer paid parking moreover different congestion effects of alternative recycling instruments and the presence of employer paid parking jointly imply that recycling the tax revenues via higher public transport subsidies may yield much more favourable welfare effects than previously believed it can easily outperform recycling the tax revenues via lower labour taxes finally cashing out parking costs to public transport users is found to generate substantial positive welfare effects numerical analysis confirms the theory

congestion games with player specific payoff functions a class of noncooperative games in which the players share a common set of strategies is described the payoff a player receives for playing a particular strategy depends only on the total number of players playing the

internal pricing and cost allocation in a model of multiproduct competition with finite capacity increments internal prices are used in practice to allocate central resources to a firms profit centers the fixed costs of capacity acquisitions are often included in these prices we examine the interaction between capacity acquisition and competition when capacity is available in fixed increments we find predictably that if the increments are small unit capacity cost is a good approximation for the internal price and if the increments are large the internal price is zero however the relationship between the internal price and the capacity increment for intermediate cases is quite irregular to the extent that it is not possible to approximate the internal price with accounting data the analysis also suggests that full cost allocation overcharges for the opportunity cost of capacity furthermore the right internal price does not act either as a way of recovering fixed costs or as a proxy for externalities such as congestion costs the conclusions are not materially altered in the case where variable costs increase at the margin and where these costs rather than hard capacity constraints are the reason to restrict output

a two player competitive discrete location model with simultaneous decisions in this paper we will describe and study a competitive discrete location problem in which two decision makers players will have to decide where to locate their own facilities and customers will be assigned to the closest open facilities we will consider the situation in which the players must decide simultaneously unsure about the decisions of one another and we will present the problem in a franchising environment most problems described in the literature consider sequential rather than simultaneous decisions in a competitive environment most problems consider that there is a set of known and already located facilities and new facilities will have to be located competing with the existing ones in the presence of more than one decision maker most problems found in the literature belong to the class of stackelberg location problems where one decision maker the leader locates first and then the other decision maker the follower locates second knowing the decisions made by the first these types of problems are sequential and differ significantly from the problem tackled in this paper where we explicitly consider simultaneous non cooperative discrete location decisions we describe the problem and its context propose some mathematical formulations and present an algorithmic approach that was developed to find nash equilibria some computational tests were performed that allowed us to better understand some of the features of the problem and the associated nash equilibria among other results we conclude that worsening the situation of a player tends to benefit the other player and that the inefficiency of nash equilibria tends to increase with the level of competition

designing economic instruments for the environment in a decentralized fiscal system designing economic instruments for the environment when external effects are important markets will be inefficient and economists have considered several broad classes of economic instruments to correct these inefficiencies however the standard economic analysis has tended to neglect important distinctions and interactions between the geographic scope of pollutants the enforcement authority of various levels of government and the fiscal responsibilities of the levels of government for example externalities generated in a particular local area may be confined to the local area or may spill over to other jurisdictions also local governments may be well informed about how best to regulate or enforce pollution control within their jurisdiction but they may not consider the effects of their actions on other jurisdictions finally the existence of locally generated waste emissions affects the appropriate assignment of both expenditure and tax responsibilities among levels of government the standard analysis therefore focuses mainly upon an aggregate or national perspective it typically ignores the possibility that the externality may be created and addressed by local governments and it does not consider the implications of decentralization for the design of economic instruments targeted at environmental problems this paper examines the implications of decentralization for the design of corrective policies that is how does one design economic instruments in a decentralized fiscal system in which externalities exist at the local level and in which subnational governments have the power to provide local public services as well as to choose tax instruments that can both finance these expenditures and correct the market failures of externalities

market and locational equilibrium for two competitors we consider a two stage location and allocation game involving two competing firms the firms first select the location of their facility on a network then the firms optimally select the quantities each wishes to supply to the markets which are located at the vertices of the network the criterion for optimality for each firm is maximizing its profit which is the total revenue minus the production and transportation costs under reasonable assumptions regarding the revenue the production cost and the transportation cost functions we show that there is a nash equilibrium for the quantities offered at the markets by each firm furthermore if the quantities supplied at the equilibrium by each firm at each market are positive then there is also a nash locational equilibrium i e no firm finds it advantageous to change its location

fiscal interactions and the case for carbon taxes over grandfathered carbon permits this paper provides simple formulas for adjusting the costs of carbon taxes and tradable carbon permits to account for interactions with pre existing tax distortions in the labour market both policies reduce labour supply as they increase product prices and reduce real household wages the resulting efficiency losses in the labour market can be substantial relative to partial equilibrium abatement costs however much of this added cost can be offset and perhaps more than offset when additional distortions from the tax system are considered if revenues from carbon taxes or auctioned permits are used to reduce distortionary taxes consequently there can be a strong case on efficiency grounds for using carbon taxes or auctioned permits over grandfathered carbon permits copyright 2003 oxford university press

strategic multi store opening under financial constraint abstract this paper analyzes strategic store openings in a situation in which firms can open multiple stores depending on the financial constraints of the firm specifically given any upper limit of the number of store openings that two potentially symmetric firms can open they sequentially determine the number of store openings including their locations to maximize their profits as a result of our analysis in a microeconomic framework we show that the equilibrium strategy can be wholly classified into only two following opposite strategies according to the level of their financial constraints involved when firms can afford to invest significant amounts of money in the market the leader chooses segmentation strategy in which a part of the market can be monopolized by opening a chain of multiple stores and deterring the follower s entry in contrast when the leader has a severe financial constraint so that it can only monopolize less than half of the market the leader chooses minimum differentiation strategy where firms open each of their stores at exactly the same point as the rival s under this strategy the leader necessarily captures just half of the market furthermore we show that regardless of potential symmetry between firms both first and second mover advantages in terms of profit can occur in the equilibrium

second best taxation of emissions and polluting goods abstract this paper studies the problem of the design of an integrated system of second best emission and output taxes in a model where production costs are negatively correlated with their emissions it shows that i the first best pigouvian rule of equating the marginal private benefit of emissions in production to the marginal social damage of emissions must be modified in the second best ii implementation of the modified pigouvian rule requires all firms to face the same marginal emission tax equal to the marginal social damage of emissions plus an adjustment term reflecting optimal tax objectives iii it may not be necessary to directly tax the polluting goods the latter taxes can be subsumed in the emission tax function iv output taxes must be set solely on the basis of optimal tax objectives no pigouvian adjustment is required v if emission taxes are restricted to be proportional and commodity taxes are constrained the modified pigouvian rule will no longer be optimal vi if preferences are weakly separable in emissions and other goods the pigouvian rule remains valid the marginal emission tax is pigouvian and emission and commodity tax instruments can be set separately to address different objectives a proportional emission tax corrects for externalities while commodity taxes are determined solely on the basis of optimal tax considerations

computable general equilibrium model analysis of economywide cross effects of social and environmental policies in chile abstract the analysis of the linkages between development policies and social and environmental variables is a neglected area within the development literature this paper focuses on the key interrelations among the economic social and environmental elements of the sustainable development triangle a thorough review is undertaken of both social and environmental policies in chile underlining important economic growth and reforms using the static cge model ecogem chile the economywide impacts of several environmental social and combined policies are simulated for the chilean economy six different policies are simulated three environmental policies that impose different taxes on pm10 so 2 and no 2 emissions respectively the same tax on pm10 in a context of high unemployment one social policy that increases government transfers to households and a mixed social environmental policy package where the environmental tax on pm10 and the social transfer policy are simulated simultaneously the results show that environmental tax policies may have negative social effects using real disposable income by quintiles as proxy the impacts depend on the use of the new revenues and the status of employment taxing pm10 emission yields better environmental results than taxing so 2 and no 2 social policies do not show negative environmental impacts combined environmental and social policies improve results thus specific compensating social policies would improve environmental policy acceptance while also reducing poverty or strong income distribution disparities the evidence suggests that environmental policies may have social impacts but not vice versa the results show that the ecogem chile model is useful for analyzing systematically and holistically different economywide policies and their impact on the chilean economy winners and losers may be identified as well as the potential magnitude of gains and losses the results obtained are not all straightforward due to indirect effects

comment on m hoel emission taxes versus other environmental policies the choice of the appropriate instrument in environmental policy is not only a question of theoretical importance it is also of considerable political relevance while environmental taxes are sometimes used to control pollution quotas and direct controls dominate in practice if this observed bias is only due to the nature of policymaking and not supported by economic reasoning politicians are not well advised to use quotas and direct controls instead of environmental taxes hoel discusses popular arguments that are often used by politicians in favour of direct controls and concludes that the results are typically not clear cut in this comment i would like to focus on the employment effects of revenue raising and nonrevenue raising instruments politicians as well as special interest groups often claim that emission taxes increase the cost of production thereby harming employment clearly in the face of high rates of unemployment in many industrialized countries potentially negative employment effects of environmental regulation raise political resistance to green policy the ongoing debate has put

the double dividend second best worlds and real world environmental policy abstract the recent series of papers by bovemberg goulder parry and others argue that the double dividend is unlikely to exist because of second best problems they argue that the imposition of environmental tax in an economy already distorted by income taxes will further distort the economy by reducing incentives to supply labor our paper argues that this is not likely to be the case because of the restrictive assumptions made by these models and because of the role of the environment as a factor of production

how robust is the uniform emissions pricing rule to social equity concerns abstract this paper examines pollution tax differentiation across industries in light of social equity concerns using theoretical and numerical general equilibrium analyses in an optimal tax framework we characterize the drivers for non uniform optimal taxes stemming from the interaction of household heterogeneity with social preferences quantitatively assessing the case of price based co2 emissions control in the u s economy we find that uniform emissions pricing is approximately optimal when social concerns are defined over inequity induced by the environmental tax the deviation from uniform emissions pricing however becomes non negligible when pollution tax rebates deviate much from optimal transfer schemes or when social concerns are defined over both policy induced impacts and inequity unrelated to environmental policy our results are robust to a number of model extensions including the stringency of the environmental target downstream vs upstream taxation pre existing distortionary taxes and parametric uncertainty in firms and households equilibrium tax responses

environmental policy public finance and the labour market in a second best world abstract environmental and tax policies and the optimal provision of clean and dirty public goods are analysed within the context of a second best framework of optimal taxation households consume both clean and dirty commodities degradation of the natural environment occurs due to the consumption of dirty private and public goods but can be offset when the government engages in abatement activities increased environmental concern implies a higher dirt tax a lower tax on labour less employment more public abatement and a cleaner environment if the elasticity of substitution between private consumption commodities and leisure is large and that between clean and dirty goods is small public consumption may expand while private consumption contracts otherwise public consumption falls

assessing welfare impact of entry into power market abstract this paper calculates the welfare impact of a new entrant based on the location of entry in the korean electricity market we use two different models one is the optimal fuel mix model to estimate the effect of a new entry in the long run the other is the variable cost minimization model to assess the contribution of an existing installed private generator in the short run a specific private generator which has a cost advantage saves a substantial amount of system wide variable costs we show that the right location for a new entrant can save power generation costs significantly even if a new entrant does not have a cost advantage

pollution permits and environmental innovation abstract this paper starts with a warning about the negative impact of plain pollution allowance markets on environmental pollution innovation stand alone spot markets enable the government to expropriate an innovation by offering a competing technology pollution permits that puts an arbitrary downward pressure on the licensing price advance allowances reduce expropriation but still create suboptimal incentives for innovation they have the further drawback that permits are inefficiently used when the innovation occurs options to pollute at a given striking price fare better than allowances because they create private incentives to phase out pollution in the case of innovation we characterize the social optimum and show that it can be implemented by issuing options to pollute inter alia finally the paper compares ex ante and ex post government procurement surprisingly ex post licensing by the innovator to the government may yield a higher licensing fee than an ex ante contract

higher price lower costs minimum prices in the eu emissions trading scheme this paper examines the introduction of a price floor in an emissions trading system ets when some emissions are regulated outside of the ets we theoretically characterize the conditions under which a price floor enhances welfare using a numerical simulation model of the european union we find that moderate minimum prices in the eu ets can reduce the costs of eu climate policy by up to thirty percent we also find that due to tax interaction effects the optimal minimum price in the eu ets should be about four times higher than the average marginal abatement cost in non ets sectors this article is protected by copyright all rights reserved

health effects and optimal environmental taxes abstract the literature on environmental taxation in the presence of pre existing distortionary taxes has shown that interactions with these distortions tend to raise the cost of an environmental tax and thus that the optimal environmental tax is less than marginal environmental damages a recent paper by schwartz and repetto 2000 challenges this finding arguing that the health benefits from reduced pollution will also interact with pre existing taxes and may cause the optimal environmental tax to exceed marginal damages schwartz and repetto s analysis represented health effects implicitly in the utility function in contrast the present paper explicitly represents health effects in an analytically tractable general equilibrium model this model shows that interactions with health effects from pollution actually will tend to reduce the optimal environmental tax contradicting schwartz and repetto s conclusion this demonstrates the usefulness of explicitly modeling health effects and it reinforces the general notion that tax interactions tend to raise the costs of an environmental tax

comparing specific and ad valorem pigouvian taxes and output quotas when the production or use of a good creates an external cost an unregulated market produces a socially inefficient quantity of output one remedy for this inefficiency is to impose a pigouvian tax equal to the marginal external damage associated with the good in many circumstances privately optimizing agents facing a pigouvian tax make decisions that are consistent with the maximization of social welfare

effects of international sharing of pollution abatement burdens on income inequality among countries abstract improvements in environmental quality will boost output production and hence economic growth however although environmental abatement equally benefits all economies in the world it is shown that if the private productive resources are not yet accumulated sufficiently in low income economies income inequality among economies can be widened in the short term not only under equal burden sharing of pollution abatement but even under income proportional burden sharing when the marginal productivity is diminishing the negative effect of the burden is large relative to the positive effect of the improved environment in economies in which resources are not accumulated sufficiently

energy prices and carbon taxes under uncertainty about global warming this paper extends the strategic interactions between producers of fossil fuels concerned about their profits and a taxing government concerned about the consumers welfare for uncertainty global warming follows an ito process stochasticity requires to differentiate between reversible and irreversible emissions in contrast to the deterministic version the unconstrained reversible case allows for a closed form solution but not the more realistic and constrained case nevertheless interesting analytical properties e g about when to stop emissions implicit conservation due to monopolistic supply are derived and complemented by a numerical example

optimal gasoline tax in developing oil producing countries the case of mexico this paper uses the methodology of parry and small 2005 to estimate the optimal gasoline tax for a less developed oil producing country the relevance of the estimation relies on the differences between less developed countries ldcs and industrial countries we argue that lawless roads general subsidies on gasoline poor mass transportation systems older vehicle fleets and unregulated city growth make the tax rates in ldcs differ substantially from the rates in the developed world we find that the optimal gasoline tax is 1 90 per gallon at 2011 prices and show that the estimate differences are in line with the factors hypothesized in contrast to the existing literature on industrial countries we show that the relative gasoline tax incidence may be progressive in mexico and more generally in ldcs

on revenue recycling and the welfare effects of second best congestion pricing in a monocentric city abstract this paper examines congestion taxes in a monocentric city with pre existing labor taxation when road toll revenue is used to finance labor tax cuts 35 of the optimal road tax in our numerical model does not reflect marginal external congestion costs but rather functions as a ramsey mirrlees tax i e an efficiency enhancing mechanism allowing for an indirect spatial differentiation of the labor tax this adds a quite different motivation to road pricing since welfare gains can be produced even in absence of congestion we find that the optimal road tax is non monotonic across space reflecting the different impacts of labor supply elasticity and marginal utility of income which both vary over space the relative efficiencies of some archetype second best pricing schemes cordon toll flat kilometer tax are high 84 and 70 respectively when road toll revenue is recycled lump sum the optimal toll lies below its pigouvian level extensions in a bimodal framework show that the optimality of using road toll revenue to subsidize public transport depends on the initial inefficiency in public transport pricing

the stern review a dual critique the stern review described as the most comprehensive review ever carried out on the economics of climate change was published on 30 october 2006 the twin papers from a combined team of scientists and economists present a critique in two parts of the stern review part i focuses on scientific issues and their treatment in the review it forms the point of departure for part ii which deals with economic aspects each paper has its own list of authors in relation to both scientific and economic issues the authors question the accuracy and completeness of the stern review s analysis and the objectivity of its treatment they conclude that the review fails to present an accurate picture of scientific understanding of climate change issues and will reinforce ill informed alarm about climate change two interrelated features of the stern review are that it greatly understates the extent of uncertainty as to possible developments in highly complex systems that are not well understood over a period of two centuries or more and its treatment of sources and evidence is persistently selective and biased these twin features have combined to make the review a vehicle for speculative alarmism in the judgement of the authors of the dual critique the stern review mishandles data gives too little attention to actual observation and evidence as distinct from the results of model based exercises and takes no account of the failures of due disclosure and the chronic limitations of peer reviewing that have been characteristic of work relating to climate change which governments have commissioned and drawn on as to specifically economic aspects the authors note among other weaknesses that the review systematically overstates projected costs of climate change partly though by no means wholly as a result of its failure to acknowledge the scope for long term adaptation to possible global warming underestimates the likely cost including to the world s poor of the drastic global mitigation programme that it calls for and proposes worldwide adoption of a specially low rate of interest for discounting the costs and benefits of mitigation on the basis of inadequate analysis and without regard for the problems and risks that would result so far from being an authoritative guide to the economics of climate change the stern review is deeply flawed it does not provide a basis for informed and responsible policies

the present value criterion and environmental taxation the suboptimality of first best decision rules this paper examines the links between environmental taxes and distortionary taxation in a dynamic model of climate change and economic growth under first best conditions labor and capital would remain untaxed and carbon dioxide emissions would be taxed at a rate equal to the present value marginal cost they impose on future society setting the discount rate equal to the marginal productivity of capital under secondbest conditions however this decision rule substantially understates optimal emissions taxes when the resulting revenues are used to provide targeted cuts in distortionary taxes conversely relatively low emissions taxes are economically justified given lump sum revenue recycling

choosing the right instrument the role of public revenues for environmental policy this paper analyses the optimal choice of second best optimal environmental policies using a partial equilibrium model the paper first reconfirms the well known result that the existence of a double dividend in its weak definition favours environmental policy instruments which maximise tax revenues for a given improvement in environmental quality additional revenues can be used to reduce the distortion of existing taxes such as taxes on labour and capital income without uncertainty environmental taxes and auctioned permits are equally appropriate in the presence of uncertainty however the optimal choice of taxes or tradable permits depends on the relative magnitudes of the marginal environmental damage and the marginal benefit from consuming a polluting good in the second part the paper therefore analyses how the revenue capacity affects the optimal choice of environmental policy instruments in the presence of uncertainty the paper shows that the first best choice rule between price and quantity regulation weitzman 1974 remains valid in a second best world with distortionary taxation

optimal differentiation of international environmental taxes in the presence of national labor market distortions we explore the implication of the doubledividend debate for international environmentaltaxes in our scenario small open economies withdifferent labor market distortions follow a commonenvironmental policy and use national environmentaltax revenues to finance labor tax cuts since thedouble dividend hypothesis does not hold a high labortax implies a low environmental tax relative to othercountries the optimal differentiation ofinternational environmental taxes is proven to be afunction of the national labor tax rates and theuncompensated elasticities of labor supply

the substantial bias from ignoring general equilibrium effects in estimating excess burden and a practical solution we show that under typical conditions the simple excess burden triangle formula substantially underestimates the excess burden of commodity taxes in some cases by a factor of 10 or more this formula performs poorly because it ignores general equilibrium interactions most important interactions between the taxed commodity and the labor market many prior studies have shown that general equilibrium interactions affect excess burden but have not appreciated the bias associated with ignoring these interactions or the quantitative importance of this bias we derive an implementable alternative to the simple formula this alternative formula captures interactions that the simple formula omits as a result it is both unbiased and usually more accurate

the welfare effects of environmental taxation recent literature has investigated whether the welfare gains from environmental taxation are larger or smaller in a second best setting than in a first best setting this question has mainly been addressed indirectly by asking whether the second best optimal environmental tax is higher or lower than the first best pigouvian rate even this indirect question has itself been approached indirectly comparing the second best optimal environmental tax to a proxy for its first best value marginal social damage msd on closer examination however msd becomes ambiguously defined and variable in a second best setting making it an unreliable proxy for the pigouvian rate given these observations the current analysis reevaluates these welfare questions and finds that when compared directly to its first best value the second best optimal environmental tax generally rises with increased revenue requirements even in cases where the second best environmental tax is lower than its first best value the welfare gains may be greater than in a first best setting these results suggest that the marginal fiscal benefit revenue recycling effect exceeds the marginal fiscal cost tax base effect over a range of environmental tax rates that for benchmark models extends above the first best pigouvian rate these findings reinforce the intuition that environmental policy complements rather than competes with the provision of other public goods

prices vs quantities public finance and the choice of regulatory instruments abstract since montgomery 1972 markets in licenses and efficient pollution control programs journal of economic theory 5 395 418 and weitzman 1974 prices vs quantities review of economic studies 41 477 491 it has generally been assumed that in a full information setting tradable quotas and taxes are equivalent regulatory instruments we demonstrate that if the government is movitated by public finance concerns this equivalence holds only if quotas are short lived moreover the government prefers quotas with the shortest possible lifetime or what is equivalent in our setting taxes

carbon taxation in russia prospects for a double dividend and improved energy efficiency russia is not only one of the world s major sources of carbon based energy coal oil and gas but is also one the most intensive users of energy furthermore russia accounts for a disproportionately large share of global carbon dioxide emissions some 5 to 6 of global carbon dioxide emissions eia 2011a it has been estimated world bank 2008 that russia could reduce its use of primary energy use by 45 with consequent economic and environmental benefits high energy and carbon intensity of the russia economy is inter alia explained by low energy prices due to high export taxes as well as administrative regulation of domestic prices of gas and electricity and low environmental taxes carbon taxes are one such pigouvian tax and they would address concerns on several fronts simultaneously in the short to medium term they would inter alia lead to lower ghg emissions and encourage the diffusion of more energy efficient technologies in the longer term the increased cost of energy inputs is expected to induce technological progress in this analysis the macroeconomic and sectoral effects of carbon taxes on the russia economy are examined this analysis addresses the following objectives i to test the double dividend hypothesis under perfect and imperfect competition in output markets to analyse ii the incidence of carbon taxes iii impacts on sectoral competitiveness iv effects on income equity and v interactions of carbon taxes with other taxes a computable single country multi sector comparative static cge model is employed russland verfugt nicht nur uber einen der grosten vorrate an kohlenstoffbasierter energie wie kohle rohol und gas sondern ist auch einer der grosten energieverbraucher daruber hinaus ist russland fur einen uberproportional grosen anteil von kohlendioxid emission etwa 5 bis 6 der weltweiten kohlendioxidemission verantwortlich mit der einfuhrung einer kohlendioxidsteuer konnten gleichzeitig unterschiedliche wirkungen erzielt werden kurz und mittelfristig wurden kohlenstoffsteuern sowohl zu einer reduzierung von treibhausgasemissionen als auch zur einfuhrung von energieeffizienteren technologien fuhren langfristig wird erwartet dass hohe energiekosten den anreiz zur entwicklung und zur investition in energiesparenden technischen fortschritt erhohen die vorliegende arbeit analysiert und bewertet die makrookonomischen und sektoralen auswirkungen einer einfuhrung von kohlenstoffsteuern auf die russische wirtschaft die ziele der arbeit bestehen darin die hypothese der doppelten dividende fur den fall des vollkommenen und des unvollkommenen wettbewerbs auf gutermarkten zu uberprufen und die inzidenz einer kohlenstoffsteuer ihre auswirkungen auf die sektorale wettbewerbsfahigkeit ihre auswirkungen auf die einkommensverteilung und die interaktion von kohlenstoffsteuern mit anderen steuern zu analysieren und zu bewerten als methodischer ansatz wurde ein single country und multi sektor model gewahlt

pollution taxes and revenue recycling abstract discussions of environmental policy and the tax system have emphasized the value of pollution tax revenues which can be used to reduce other tax distortions in the economy however by raising private marginal production costs environmental taxes also tend to reduce gdp and exacerbate the welfare costs of conventional taxes for environmental taxes in consumption goods industries the net welfare change from these two effects is negative unless this good is a relatively weak substitute for leisure an estimate for the optimal pollution tax with full revenue recycling is 63 to 78 of marginal environmental damages

tax interaction effects environmental regulation and rule of thumb adjustments to social cost preexisting distortions in factor markets complicate the estimation of the social welfare effects of regulatory interventions the existence of these tax interaction effects ties suggests that general equilibrium ge approaches should be used to evaluate regulatory policies however formal ge analysis is not always feasible for the numerous environmental regulations proposed by federal state and local agencies the question addressed in this paper is whether an empirically based rule of thumb upward adjustment factor is appropriate to properly scale social cost estimates in environmental policy we argue that such rule of thumb adjustments are significantly less reliable than estimates based on a detailed general equilibrium analysis because of the uncertainty about both the magnitude and sign of the social cost distortion in addition to addressing this question the paper gives an overview of ties and their relevance to environmental policy

nonseparable utility and the double dividend debate reconsidering the tax interaction effect the literature on the use of environmental taxes inthe presence of distortionary labor taxes warns thata partial equilibrium pigouvian tax analysis is notappropriate because increasing the price of dirtygoods can futher aggravate the prexisting distortions this argument is most frequently made assuming thatlabor is taxed to meet a fixed revenue requirement when a dirty good is also taxed others argue thatthis lowers workers real wages causing people toreduce their labor supply below its already suboptimallevel aggravating labor market distortions however most papers ignore the effect that a cleanerenvironment can have on labor supply that is mostpast work has assumed that the quality of theenvironment is weakly separable in the utilityfunction we argue that a cleaner environment canincrease labor supply at least partially offsettingany incentive for workers to decrease their laborsupply further we show explicitly how relaxing theseparability assumption affects the standardresults

biofuel subsidies versus the gas tax the carrot or the stick abstract this paper provides an analytical framework to examine the relative efficiencies of a revenue neutral biofuel subsidy and a gas tax in the presence of pre existing distortions and growing substitutability between fuels both policies are set to achieve a targeted reduction in gasoline use at the state level the model is then calibrated for a small open economy such as illinois which is one of the largest producers of biofuels such as ethanol in the u s the main result of the paper shows that raising the biofuel subsidy use reduces overall welfare by more than a higher gas tax both aimed to achieve a targeted reduction in pure gasoline the relative efficiency of the higher gas tax is primarily due to it exacerbating the pre existing distortion in the biofuel market by less than the subsidy moreover for current parameter estimates welfare improving policy combinations for achieving a targeted amount of energy security are higher gas taxes combined with lower biofuel subsidies and a lower tax on income however the preference for a gasoline labor tax swap shrinks as the elasticity of substitution between the two fuels rises

energy taxation and the double dividend effect in taiwan s energy conservation policy an empirical study using a computable general equilibrium model abstract faced with pressure from greenhouse gas reductions and energy price hikes the taiwan government is in the process of developing an energy tax regime to reflect environmental external costs and effectively curb energy consumption as well as mitigate co2 emissions through an adequate pricing system this study utilizes a cge model to simulate and analyze the economic impacts of the draft energy tax bill and its complementary fiscal measures under the assumption of tax revenue neutrality the use of energy tax revenue generated for the purpose of reducing income tax is the best choice with double dividend effects since it will effectively stimulate domestic consumption and investment and consequently mitigate the negative impacts of the distortionary tax regime the double dividend effect is less significant however when the supplementary measures being used are for government expenditure nevertheless all supplementary measures have effectively reduced energy consumption which means they have delivered at least the first dividend in the sense of co2 emissions control it has been verified in this study that having adequate public finance policy measures is the key to realizing the double dividend effect

environmental levies and distortionary taxation pigou taxation and pollution i note an important distinction between the optimal price of environmental quality in a second best world and the optimal level of environmental quality using an analytical general equilibrium model i show that for reasonable parameter values an increase in tax distortions arising from an increase in required tax revenues leads to a fall in the optimal pigouvian tax rate even while environmental quality improves in general knowledge of the direction of changes in optimal environmental tax rates due to changes in the economy is not sufficient for understanding the impact on environmental quality 2003 elsevier science b v all rights reserved

product line selection production decisions and allocation of common fixed costs abstract product costs are determined in practice for the purpose of pricing make buy and product line decisions while many costs are directly assignable to individual products common costs have historically presented a difficult conundrum a variety of cost allocation methods are used in practice or have been suggested in the literature to attach these costs to individual products while such procedures are theoretically unsupported they may be able to mimic the correct decisions adequately in this paper we investigate the efficacy of certain cost allocation schemes in a competitive environment the schemes are evaluated with reference to a scenario in which there is a single fixed cost incurred in manufacturing any subset of a set of products under idealized conditions a cournot nash model is developed that describes the number of entering firms and the equilibrium price and production levels using this as a point of reference it is shown that by using gross contribution as an allocation basis optimal product line decisions are achieved without distorting the selection of production levels moreover competitive pressure sufficient to drive total net profits close to zero is sufficient to require that any allocation rule supporting optimal product line decisions yields allocations nearly proportional to gross contributions an analogy is drawn with the allocation of joint costs to coproducts in a competitive environment and the corresponding allocation in proportion to net realizable value

welfare impacts of alternative public policies for agricultural pollution control in an open economy a general equilibrium framework a general equilibrium approach is used to evaluate the welfare impacts of alternative policies for reducing agricultural pollution in an open economy with preexisting distortions caused by income taxes and agricultural subsidies the policies examined here include the removal of distortionary agricultural subsidies we find that even though these distortions are small compared to others in the economy removing them and imposing nitrogen reduction subsidies and or output taxes can enhance welfare and reduce nitrogen pollution thereby leading to a substantial double dividend the relative efficiency of the alternative policies examined here depends on the level of the nitrogen reduction target copyright 2008 oxford university press

optimal control of externalities in the presence of income taxation optimal control of externalities a substantial literature examines second best environmental policy focusing particularly on how the pigouvian directive that marginal taxes should equal marginal external harms needs to be modified in light of the preexisting distortion due to labor income taxation additional literature is motivated by the possibility that distributive concerns should amend the internalization prescription it is demonstrated however that simple first best rules unmodified for labor supply distortion or distribution are correct in a natural basic formulation of the problem specifically setting all commodity taxes equal to marginal harms and subsidies equal to marginal benefits can generate a pareto improvement likewise a marginal reform in the direction of the first best can yield a pareto improvement for other reforms a simple efficiency test characterizing when a pareto improvement is possible is offered qualifications and explanations for the substantial departure from results in previous work are also elaborated

optimal dynamic carbon taxes in a climate economy model with distortionary fiscal policy how should carbon be taxed as a part of fiscal policy the literature on optimal carbon pricing often abstracts from other taxes however when governments raise revenues with distortionary taxes carbon levies have fiscal impacts while they raise revenues directly they may shrink the bases of other taxes e g by decreasing employment this article theoretically characterizes and then quantifies optimal carbon taxes in a dynamic general equilibrium climate economy model with distortionary fiscal policy first this article establishes a novel theoretical relationship between the optimal taxation of carbon and of capital income this link arises because carbon emissions destroy natural capital they accumulate in the atmosphere and decrease future output consequently this article shows how the standard logic against capital income taxes extends to distortions on environmental capital investments second this article characterizes optimal climate policy in sub optimal fiscal settings where income taxes are constrained to remain at their observed levels third this article presents a detailed calibration that builds on the seminal dice approach but adds features essential for a setting with distortionary taxes such as a differentiation between climate change production impacts e g on agriculture and direct utility impacts e g on biodiversity existence value the central quantitative finding is that optimal carbon tax schedules are 8 24 lower when there are distortionary taxes compared to the setting with lump sum taxes considered in the literature

environmental policy in the presence of induced technological change we examine the hypothesis that induced technological change itc can dramatically lower the cost of a carbon tax in a static optimal tax model the research and development sector is represented by an aggregate stock of energy saving technology which acts as a weak substitute with a polluting resource in the energy generation sector using this model we analytically show how itc occurs and affects the cost of a carbon tax applying quantitative estimates of the size of itc to numerical simulations calibrated to the us economy we find that existing empirical evidence can reduce the welfare cost of environmental tax reform by 12 our tests of alternative parameters show that this result is highly sensitive to the assumptions used suggesting that itc could result in much larger reductions in cost

energy taxes in the netherlands what are the dividends in this paper the environmental and economic effects of the introduction of a unilateral energy tax in the netherlands are analysed using an applied general equilibrium age model the effects of a small user energy tax and a general energy tax are compared while taking into account different tax recycling mechanisms the model contains a great level of detail with respect to emissions and environmental indicators greenhouse effect acidification eutrophication and waste which is helpful for assessing environmental quality the results show that the introduction of a small environmental tax reform not only improves the environment but also raises non environmental welfare which is due to an improvement of the efficiency of the tax structure

paternalism and tax competition when consumers make mistakes the government may wish to use paternalistic taxation as a corrective measure we analyse the extent to which tax competition undermines the feasibility of paternalistic taxation we show that the paternalistic component of a tax on a harmful good is reduced when there is cross border shopping but it does not disappear altogether in a model with tax competition between two countries only one of which has a paternalistic objective we show that a minimum tax rate requirement can be pareto improving despite the divergence in policy objectives tax harmonization however reduces welfare in the non paternalistic country

evaluating policy interventions with general equilibrium externalities abstract we report on the results of analytical and numerical models that describe the effects of non separable externalities or public goods on public policies with important general equilibrium consequences in the numerical exercise we calibrate a general equilibrium model with non separable air quality benefits in order to measure the excess burden and total net benefits of transportation and energy taxes in the 1995 u s economy the change in the physical level and the economic value in air quality associated with a given policy is a function of the substitution patterns between air quality and market goods that we assume the size of the deadweight loss due to pre existing distortions such as a tax on labor income is substantially affected by these substitution patterns

the resource adequacy scheme in the korean electricity market abstract in south korea the incentive scheme for generators to add new power generation is based on the system marginal price smp and the capacity payment cp the infra marginal generators receive an extra margin due to the high smp level and the new infra marginal generators need to be built to achieve the optimal fuel mix however the metropolitan zone needs more marginal generators due to the transmission congestion and environmental regulations but the marginal generator in the metropolitan zone does not have adequate profits for the new investment under the current cp this paper suggests the appropriate investment incentive scheme for different zones the introduction of forward capacity markets for different regions creates higher capacity market prices in the metropolitan zone than those in the southern zone the introduction of forward capacity market also induces a new lng generator investment in the metropolitan zone while only new infra marginal generators need to be added in the southern zone

the optimal fuel mix and redistribution of social surplus in the korean power market this paper investigates the difference between the optimal fuel mix incorporating a pre installed generation capacity constraint and the actual fuel mix in the korean power market since the restructuring of the market the fuel mix has been determined partly by investors and partly by the basic plan for long term electricity supply and demand bpe both the system marginal price smp and the capacity payment cp which has been based on the fixed cost of a specific gas turbine generator were intended to provide an investment incentive in the market however they did not bring about an optimal fuel mix in korea under the circumstances of a shortage of base load generators these generators may garner excessive profits due to a high smp level however the adjustment scheme of profit between kepco and gencos left scant profit for generators this paper suggests that a contract is needed to create the appropriate profit and tax levels for these base load generators the redistribution of profit improves equality between consumers and generators and the proper margin creates incentives for base load technology investment in korea

two player simultaneous location game preferential rights and overbidding abstract competitive location problems can be characterized by the fact that the decisions made by others will affect our own payoffs in this paper we address a discrete competitive location game in which two decision makers have to decide simultaneously where to locate their services without knowing the decisions of one another this problem arises in a franchising environment in which the decision makers are the franchisees and the franchiser defines the potential sites for locating services and the rules of the game at most one service can be located at each site and one of the franchisees has preferential rights over the other this means that if both franchisees are interested in opening the service in the same site only the one that has preferential rights will open it we consider that both franchisees have budget constraints but the franchisee without preferential rights is allowed to show interest in more sites than the ones she can afford we are interested in studying the influence of the existence of preferential rights and overbidding on the outcomes for both franchisees and franchiser a model is presented and an algorithmic approach is developed for the calculation of nash equilibria several computational experiments are defined and their results are analysed showing that preferential rights give its holder a relative advantage over the other competitor the possibility of overbidding seems to be advantageous for the franchiser as well as the inclusion of some level of asymmetry between the two decision makers

optimal environmental taxation in the presence of other taxes general equilibrium analyses this paper examines the optimal setting of environmental taxes in economies where other distortionary taxes are present we employ analytical and numerical models to explore the degree to which in a second best economy optimal environmental tax rates differ from the rates implied by the pigovian principle according to which the optimal tax rate equals the marginal environmental damages both models indicate contrary to what several analysts have suggested that the optimal tax rate on emissions of a given pollutant is generally less than the rate supported by the pigovian principle moreover the optimal rate is lower the larger are the distortions posed by ordinary taxes numerical results indicate that previous studies may have seriously overstated the size of the optimal carbon tax by disregarding pre existing taxes this abstract was borrowed from another version of this item

environmental quality medical care demand and environmental tax interactions assuming that improvements in environmental quality lead to lower demand for medical care it has been shown that general equilibrium interactions with the tax distorted labor market reduce the benefits from such improvements and thus lower the second best optimal environmental tax this paper provides some insights on how the link between environmental quality individual s health capital and the demand for medical care affects the analysis of pollution taxes the paper develops structural conditions under which improvements in environmental quality decrease increase the demand for medical care and discusses their implications for environmental tax interactions

optimal green tax reforms yielding double dividend in an stylized endogenous growth economy with a negative externality created by co2 emissions and in which abatement activities are made by private firms we find a wide range of dynamically feasible green tax reforms yielding the double dividend without any need to assume a complex production structure or tax system or a variety of externalities in production as a remarkable finding we obtain certain scenarios in which increasing the emissions tax up to the pigouvian level and removing completely the income tax is dynamically feasible and also it is the second best reform hence as a difference to previous literature in these scenarios the first best tax mix is implementable allowing for the elimination of both environmental and non environmental inefficiencies our result arises because of the consideration of public debt issuing and the management of the government budget balance with an intertemporal perspective the result is obtained for an intermediate range of environmental bearing in preferences the valid range being contingent on the pre existing income tax rate the type of tax reform that we propose could also be implemented for different energy taxes

environmental tax reform efficiency and political feasibility although market based environmental measures like uniform co2 taxes reach a given standard at minimal cost they do not prevail in real world policies an effciency oriented environmental policy fails as it involves a redistributen of pollution rights resulting in a strong and generally effective opposition of the groups that forego economic rents the present paper analyzes the tradoff between efficiency and political feasibility of several co2 tax and reimbursement schemes using a computable general equilibrium model of switzerland the simulation results indicate that a policy combining a uniform co2 tax with differentiated labor subsidies preventing intersectoral redistribution is a better solution for the tradeoff than the presently existing tax schemes in various countries

competitive location production and market selection abstract this paper investigates how firms should select their production sites capacities and quantities under rivalry there are assumed to be a finite number of discrete potential location sites and a finite number of discrete markets which may or may not coincide firms first decide either simultaneously or sequentially whether and where to establish a production site the fixed cost of opening a facility and the marginal cost of production both depend on where the facility is located firms then choose capacity and a production quantity for each market prices in each market are determined by the total quantity available at that location via the cournot mechanism this formulation thus addresses multi market oligopolistic spatial competition with heterogeneity in production and logistics costs we then analyze the nash equilibria of the entry game and provide sufficient conditions for the existence of equilibria in the simultaneous entry game at equilibrium firms may not produce for all markets and may have limited market areas however these areas may overlap so that there are multiple suppliers in any market in general there may not be a first mover advantage and early entrants may earn lower profits than later entrants

competition through capacity investment under asymmetric existing capacities and costs this paper discusses the way that different operational characteristics including existing capacity scale economies and production policy have an important influence on the capacity outcomes when firms compete in the market place we formulate a game theoretical model where each firm has an existing capacity and faces both fixed and variable costs in purchasing additional capacity specifically the firms simultaneously or sequentially make their expansion decisions and then simultaneously decide their production decisions with these outputs being capacity constrained we also compare our results with cases where production has to match capacity by characterizing the firms capacity and production choices in equilibrium our analysis shows that the operational factors play a crucial role in determining what happens the modeling and analysis in the paper gives insight into the way that the ability to use less production capacity than has been built will undermine the commitment value of existing capacity if a commitment to full production is not possible sinking operational costs can enable a firm to keep some preemptive advantage we also show that the existence of fixed costs can introduce cases where there are either no pure strategy equilibrium or multiple equilibria the managerial implications of our analysis are noted in the discussion our central contribution in this paper is the innovative integration of the strategic analysis of capacity expansion and well known s s policy in operations and supply chain theory

planes ships and taxes charging for international aviation and maritime emissions international aviation and maritime transport account for a significant and growing share of global carbon emissions yet they are not only excluded from the kyoto agreement and all current carbon pricing schemes but do not even pay fuel excises of the type standard for other transport activities moreover each sector benefits from preferential tax treatment failure to charge vat on international aviation and the application of tonnage tax regimes rather than the normal corporate tax in maritime this paper considers the design of fuel charges in these sectors to address these distortions and quantifies their impact on emissions revenue and welfare showing amongst other things that the gain from offsetting the pre existing tax distortions may be as significant as those from reducing emissions it shows too how compensation schemes can be designed to protect the poorest countries a key ingredient in the politics of the issue given the practical need for wide applicability of such charges the real challenge is to amass the degree of international cooperation required especially strong for maritime failure of which to some degree explains their current under taxation and unsurprisingly to decide who gets the money technically these charges should if anything be rather easy to implement michael keen ian parry and jon strand

perception and information in a competitive location model this paper considers a situation in which two competitors locate one facility each at the vertices of a tree their decisions are based on the capture of demands at the vertices of the tree as opposed to the usual models it is assumed that the true demands are unknown and that each competitor has its own perception of them the paper investigates a facility planner s advantage that results from knowledge concerning his competitor s perception stackelberg solutions are analyzed as well as possible advantages to the competitor who locates first

on environmental taxation under uncertain environmental damage this paper addresses optimal taxation when therelationship between the consumption of a dirty good and the resulting environmentaldamage is uncertain and treated as a randomvariable by policy makers the main purpose isto analyze how increased uncertainty measuredas a mean preserving increase in the spread ofthis random variable affects the optimalcommodity tax on the dirty consumption good incase the only task of government is to correctthe environmental externality and if thepreferences are characterized by nondecreasingabsolute risk aversion we find that thecommodity tax on the dirty consumption goodincreases in response to additionaluncertainty if on the other hand thegovernment provides a public good and uses alump sum tax in addition to the commodity tax it is possible that the commodity tax decreasesas a response to additional uncertainty evenif the preferences are characterized bynondecreasing absolute risk aversion a similarresult emerges although for different reasons if the lump sum tax is replaced by a laborincome tax

impacts of climate policy on the competitiveness of canadian industry how big and how to mitigate competitiveness concerns have been at the forefront of climate policy debates in canada particularly as a result of its high energy intensity and significant exposure to international markets this paper uses a dynamic computable general equilibrium model to assess the likely impacts on sectoral competitiveness that would accompany efforts to meet greenhouse gas mitigation targets that have been set by the canadian government additionally it evaluates several design mechanisms that could be used to reduce the negative competiveness impacts associated with adoption of domestic climate policies the analysis suggests that several sectors would likely face significant competiveness challenges under a reference scenario in which permits are given to emitters in lump sum however it finds that competiveness impacts can be minimized by using output based recycling of permits or by using border tax adjustments

the two part instrument in a second best world abstract standard pigovian tax theory has been extended in two directions first many polluting activities are difficult to tax because they are not market transactions and so recent papers have shown that the same effects can be achieved by use of a two part instrument 2pi a tax on output or income and a subsidy for clean alternatives to pollution it is a generalization of a deposit refund system drs second a different literature concerns the second best pollution tax in the presence of other tax distortions here we combine the two extensions by looking at the second best 2pi when government needs revenue is the deposit larger and the rebate smaller we find explicit solutions for each tax and subsidy in a general equilibrium model with other tax distortions and we compare these to the rates in a first best model the tax subsidy combination is explained in terms of a tax effect an environmental effect and a revenue effect the model allows for flexible interpretation to show various applications of the 2pi we also discuss important caveats

intergenerational effects of a green tax reform for a more sustainable social security system abstract green tax reforms are popular in some circles not only because of their direct effect on reducing pollution but also because their revenue capacity may allow to reduce other more distortionary taxes despite their potential benefits the political implementation of green tax reforms is not straightforward changes in environmental taxes have different intergenerational effects which need to be taken into account when considering their political support among a country s population in this paper we analyze the economic and intergenerational welfare effects of introducing a green tax reform to ameliorate the spanish social security system we consider two types of energy taxes an energy consumption tax and an energy input tax we find that both types of reforms are favored by young individuals but rejected by older generations the number of generations supporting the reform depends crucially on the disutility that individuals derive from pollution suggesting that an increase in environmental awareness may be needed for green tax reforms to be politically viable

labor supply and the double dividend abstract a series of recent articles have argued that environmental taxes and cap and trade permit systems generate large distortions in the labor market the claim is made that the higher prices for dirty goods induced by these incentive based systems generate a tax interaction effect leading to reductions in labor supply that are generally on net welfare reducing for this reason it is argued a double dividend seldom exists however price level increases both by lowering family income and by reducing cross spousal wage substitution effects will tend to have offsetting positive impacts on labor supply these effects are large enough to convert negative labor supply responses to rising prices into positive ones the empirical literature also supports a positive relationship between price level increases and labor supply these observations cast doubt on a central critical assumption underlying the critique of the double dividend in the tax interaction effect literature

environmental tax design with endogenous earning abilities with applications to france abstract this paper studies environmental taxation in a mirrlees setting with two novel features first energy a polluting good is used both as a factor of production and a final consumption good second the wage is determined endogenously while labor of different individual types remain homogeneous the model is calibrated for the french economy we show that i the optimal tax is less than the marginal social damage of emissions and turns into an outright subsidy when the inequality aversion index is high ii the optimal tax on energy as an input is always equal to its marginal social damage iii the social welfare gain due to lowering the current energy taxes to their optimal levels with the general income tax being set optimally in both cases is between 17 and 32 euro per household this hurts the rich and benefits the poor

alleviating unemployment the case for green tax reforms abstract it has been argued recently that imposing taxes on pollution produces additional tax revenues which can be used to replace labour taxes and thus reap a double dividend in the form of improving environmental quality and alleviating unemployment this paper analyses the employment effects of revenue neutral green tax reforms by focusing on the revenue recycling effect our model contains three features which are important when looking at the employment effects of green tax reforms first there is unemployment in equilibrium second wages are determined endogenously third various institutional arrangements for taxing unemployment benefits for the price indexation of unemployment benefits and the personal tax exemption are considered it is shown that these institutional arrangements are crucial for the effectiveness of green tax reforms a revenue neutral green tax reform will boost employment if unemployment benefits are nominally fixed and taxed at a lower rate than labour income employment actually falls if unemployment benefits are price indexed and taxed at the same rate a revenue neutral green tax reform which increases the personal tax credit will never increase employment

a note on optimal taxation in the presence of externalities abstract i consider the problem of optimal taxation with externalities in a general setup encompassing most of optimal taxation models found in the literature it is demonstrated that when direct taxation of externalities is possible optimal taxes can be expressed as the sum of the optimal pigouvian taxes and the optimal taxes in a related problem without externalities regardless of what other tax instruments are available this result generalizes the so called principle of targeting

competition and structure in serial supply chains with deterministic demand supply chains often consist of several tiers with different numbers of firms competing at each tier a major determinant of the structure of supply chains is the cost structure associated with the underlying manufacturing process in this paper we examine the impact of fixed and variable costs on the structure and competitiveness of supply chains with a serial structure and price sensitive linear deterministic demand the entry stage is modeled as a simultaneous game where the players take the outcomes of the subsequent post entry cournot competition into account in making their entry decisions we derive expressions for prices and production quantities as functions of the number of entrants at each tier of a multitier chain we characterize viability and stability of supply chain structures and show using lattice arguments that there is always an equilibrium structure in pure strategies in the entry game finally we examine the effects of vertical integration in the two tier case altogether the paper provides a framework for comparing a variety of supply chain structures and for studying how they are affected by cost structures and by the number of entrants throughout the chain

co2 stabilization may be a no regrets policy restricting co2 emissions requires changing today s consumption pattern away from energy and emission intensive commodities towards cleaner goods the cost of stabilizing co2 emissions at the 1990 level by the year 2000 say as compared to a business as usual trend is estimated by several researchers to be on the order of 1 of gnp we will argue that the cost may be overestimated because of a too simple model describing the working of the economic system and the evaluation of welfare we demonstrate that by expanding a model to include the actual tax system and negative externalities the cost to present generations from restricting emissions by a co2 tax may be negative that is some reduction may actually correspond to a no regrets policy the reasons are inefficiencies in today s tax system and non optimal handling of negative externalities our analysis suggests that a co2 tax and reduced emissions will lessen such inefficiencies

from regressive pollution taxes to progressive environmental tax reforms european countries have increased their use of environmental tax instruments by designing new tax bases but many countries face opposition from public opinion for fear of the distributive consequences of these environmental tax reforms this paper sheds light on the distributive consequences of environmental tax policies when households are heterogeneous the objective is to assess whether an environmental tax reform could be pareto improving when the revenue of the pollution tax is recycled by a change in labor tax properties we show that whatever the degree of regressivity of the environmental tax alone it is possible to design a recycling mechanism that renders the tax reform more pareto efficient by simultaneously decreasing the wage tax and increasing its progressivity

revisiting the cost of protectionism abstract most studies of the welfare impacts of trade policy have ignored interactions between these policies and pre existing distortions from the income tax this paper demonstrates that when these interactions are taken into account the potential gains or losses from tariffs import quotas or voluntary export restrictions are significantly magnified however as long as the trade barrier doesn t generate rents for domestic households the optimal level of the trade barrier is unchanged from the first best case trade policies which do increase domestic rents either in the form of quota rents or rents to fixed factors in production suffer an additional efficiency cost and the optimal policy in this case is less strict than in the first best case

car notches strategic automaker responses to fuel economy policy notches where small changes in behavior lead to large changes in a tax or subsidy gure prominently in many policies but have been rarely examined by economists in this paper we analyze a class of notches associated with policies aimed at improving vehicle fuel economy we provide several pieces of evidence showing that automakers respond to notches in fuel economy policy by precisely manipulating fuel economy ratings so as to just qualify for more favorable treatment we then describe the welfare consequences of this behavior and derive a welfare summary statistic applicable to many contexts