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on Environmental Economics |
| By: | Coria, Jessica (Department of Economics, School of Business, Economics and Law, Göteborg University); Hennlock, Magnus (Department of Economics, School of Business, Economics and Law, Göteborg University) |
| Abstract: | In this paper we analyze the eects of the choice of price (taxes) versus quantity (tradable permits) instruments on the policy response to technological change. We show that if policy responses incur transactional and political adjustment costs, environmental targets are less likely to be adjusted under tradable per- mits than under emission taxes. This implies that the total level of abatement over time might remain unchanged under tradable permits while it will increase under emission taxes.<p> |
| Keywords: | Environmental Taxes; Tradable Permits; Technology Adoption; Policy Adjustment; Regulatory Costs |
| JEL: | H82 O32 O33 Q52 Q55 Q58 |
| Date: | 2010–05–10 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:gunwpe:0442&r=env |
| By: | Lehmann, Paul |
| Abstract: | The combination of emissions trading and emissions taxes is usually rejected as redundant or inefficient. This conclusion is based on the restrictive assumption that both policies are exclusively meant to control pollution. However, particularly taxes may pursue a variety of other policy objectives as well, such as raising fiscal revenues or promoting equity. Multiple objectives may justify multiple policies. In this case, welfare losses with respect to pollution control may be traded off by benefits from attaining other policy objectives. Consequently, pragmatic policy recommendations have to be based on an in-depth understanding of interactions in the policy mix. This article makes three contributions that are relevant in this respect. (1) The most important factors distorting pollution abatement under the policy mix are identified. This insight is required to estimate the actual extent of inefficiency in controlling pollution, and to compare it with benefits of attaining other objectives of the tax. (2) The policy mix is not only compared to the unrealistic ideal of an efficient single emissions trading scheme but also to a suboptimal heterogeneous emissions tax. It is shown that if the tax is required to address multiple policy objectives, the implementation of an emissions trading scheme in addition may in fact increase the efficiency of pollution control. (3) It is demonstrated that welfare losses can be minimized within a policy mix by modifying emissions trading design. |
| Keywords: | policy mix; emissions trading; emissions tax; efficiency |
| JEL: | H23 H32 Q58 |
| Date: | 2010–04 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:22544&r=env |
| By: | Alain-Désiré Nimubona (Department of Economics, University of Waterloo) |
| Abstract: | During the Doha Round at the World Trade Organization (WTO), reductions in trade barriers on environmental goods (EG) were put forward as a means of helping developed and developing countries alike deal with current environmental problems. We examine the potential effectiveness of such a strategy in countries that rely on imports for their needs in EG. We point out that liberalizing trade in EG might in fact lead to less stringent environmental regulations, resulting in an actual rise in pollution levels. We then show conditions under which the environmental effectiveness and the welfare improvement objective of this trade reform are compromised. |
| JEL: | F12 F18 H23 Q58 |
| Date: | 2010–05 |
| URL: | http://d.repec.org/n?u=RePEc:wat:wpaper:1004&r=env |
| By: | Simon Alcouffe (ESC Toulouse - Ecole Supérieure de commerce de Toulouse); Nicolas Berland (DRM - Dauphine Recherches en Management - CNRS : UMR7088 - Université Paris Dauphine - Paris IX); Benjamin Dreveton (CEREGE - IAE de Poitiers); Moez Essid (GRIISG - ISG paris) |
| Abstract: | This paper draws on Environmental Management Accounting (EMA) literature and cost driver theory to study the nature and role of environmental cost drivers. More specifically, two types of operations related to environmental protection were empirically examined: the removal of asbestos from buildings and soil remediation. Findings from a series of case studies are presented and discussed. The paper contributes to existing literature in three ways: (1) by testing the adaptability of cost drivers typologies in a non-traditional, nonindustrial setting (2) by proposing a more dynamic vision of the cost of social and environmental responsibility of the firm, and (3) by shedding light on the complex interrelationships of environmental cost drivers. |
| Keywords: | Environmental Management Accounting, Cost Driver, Social & Environmental Responsibility. |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-00479538_v1&r=env |
| By: | Reviva Hasson; Åsa Löfgren; Martine Visser |
| Abstract: | This paper explores the collective action problem as it relates to climate change and develops two models that capture the mitigation/adaptation trade-off. The first model presents climate change as a certain disaster, while the second models climate change as a stochastic event. A one-shot public goods experiment with students reveals a relatively low rate of mitigation for both models. The effect of vulnerability towards climate change is also examined by varying the magnitude of the disaster across treatments. Our results find no significant difference between the high and low-vulnerability environments. This research contributes to the literature concerning public goods experiments as well as the analysis of climate change policy. |
| Keywords: | Public good; climate change; mitigation; adaptation; experiment; risk |
| JEL: | I21 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:rza:wpaper:178&r=env |
| By: | Christopher Jones; Jean-Michel Glachant |
| Abstract: | Reducing the European Union GHG emissions by at least 80% by 2050 will require a near zero carbon electricity, road and rail transport industry, and heating and cooling in buildings. As compared to “business as usual” the amount of energy required will basically vary according to the level of energy efficiency: it is the “system scale”. Then it is the “system design” which will provide the needed carbon-free technologies consisting of renewable, nuclear and fossil fuels with carbon capture and storage. A zero carbon energy system by 2050 is then demonstrated to be feasible. However it is far from easy and requires immediate and substantial policy action. The main policy implications are addressed in this paper. The 5 years 2010-2015 will be decisive in establishing a regulatory environment whereby the EU will be in a position, by 2020, to take the next steps to achieve the 2050 goal. |
| Date: | 2010–03 |
| URL: | http://d.repec.org/n?u=RePEc:mee:wpaper:1002&r=env |
| By: | Carl Gaigné (INRA, UMR1302, 4 Allée Bobierre, F-35000 Rennes, France); Stéphane Riou (UMR CNRS 5824 GATE Lyon-Saint-Etienne, Université de Saint-Etienne; Department of Econometrics and Tinbergen Institute, Free University, The Netherlands); Jacques-François Thisse (CORE, Université Catholique de Louvain (Belgium), Université du Luxembourg, and CEPR) |
| Abstract: | There is a large consensus among international institutions and national governments to favor urban-containment policies - the compact city - as a way to reduce the ecological footprint of cities. This approach overlooks the following basic trade-off : the concentration of activities decreases the ecological footprint stemming from commodity shipping between cities, but it increases emissions of greenhouse gas by inducing longer worktrips. What matters for the ecological footprint of cities is the mix between urban density and the global pattern of activities. As expected, when both the intercity and intraurban distributions of activities are given, a higher urban density makes cities more environmentally friendly and raises global welfare. However, once we account for the fact that cities may be either monocentric or polycentric as well as for the relocation of activities between cities, the relationship between density and the ecological footprints appears to be much more involved. Indeed, because changes in urban density affect land rents and wages, firms are incited to relocate, thus leading to new commuting patterns. We show policies that favor the decentralization of jobs in big cities may reduce global pollution and improve global welfare. |
| Keywords: | greenhouse gas, commuting costs, transport costs, cities; urban-containment policy |
| JEL: | D61 F12 Q54 Q58 R12 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:gat:wpaper:1001&r=env |
| By: | Maikel Lieuw-Kie-Song (Independent researcher and consultant); Radhika Lal (International Policy Centre for Inclusive Growth) |
| Abstract: | In the context of the economic and environmental challenges that the world is facing today, there have been calls for a Global Green New Deal (see, for example, UNEP/ILO/IOE/ITUC, 2008). Such calls have highlighted the employment-creation benefits of ?green? investments, mainly those aimed at accelerating the shift to low-carbon economies. Policy innovations by developing countries, such as South Africa and India in particular, also point to the value of employment-generating environmental activities relevant for reclaiming or enhancing access to public environmental goods and services, as well as for improving the productive livelihoods of the poor. This One Pager outlines the economic rationale for promoting these types of ?green jobs? and for adopting a ?public employment? approach in this regard. |
| Keywords: | Green Jobs for the Poor: Why a Public Employment Approach is Needed Now |
| Date: | 2010–02 |
| URL: | http://d.repec.org/n?u=RePEc:ipc:opager:105&r=env |
| By: | Jie He (GREDI, Faculte d'administration, Université de Sherbrooke); David Roland-Holst (Mills College, UC Berkeley, and RDRC) |
| Abstract: | This paper uses a dynamic CGE model, calibrated to detailed Chinese emissions data, to assess two important questions. What can we reasonably expect Chinese emissions trends to look like over the next three decades? Secondly, what would be the appropriate policy interventions to flatten Chinese emissions trajectories and reduce the risk of local, regional, and even global adversity? This research is original in its direct use of the new industrial sector-level emissions and energy using data from China to estimate the energy-specific emission effluent rate and its detailed treatment of policies taking account of the three main determinants of pollution intensity: growth, output composition, and technological change. Our results indicate that, without further effective emission control measures, China’s economic growth over the next two decades will contribute significantly to SO2 emission problems, in which the emission firstly increase from the rapid expansion of the transportation service sectors until 2018, then from the heavy industrialization process after 2018. With the potential technical progress, the emission burden will be centralized back to two energy sectors: electricity generation and petrol and coke refining during these two periods. Detailed examination of the structural and technological components of pollution shows that efficient pollution mitigation can be realized by focused abatement activities, cleaner production, and advances in cleaner fuel products and their use technologies. |
| Keywords: | China, Global warming, CGE modeling |
| JEL: | Q53 D58 Q54 Q58 |
| Date: | 2010–04–26 |
| URL: | http://d.repec.org/n?u=RePEc:shr:wpaper:10-11&r=env |
| By: | Denis Cormier (Université du Québec - Université du Québec - Université du Québec); Marie-Josée Ledoux (Université du Québec - Université du Québec - Université du Québec); Michel Magnan (Université Concordia - Université Concordia) |
| Abstract: | Corporations increasingly define their social and environmental initiatives and activities as part of their Corporate Social Responsibility (CSR). Disclosure practices have followed suit as well with social and environmental information typically being combined, often through a CSR report. The emergence of CSR is a response to the demands of activist investors, ethical and green institutional investors as well as rating services (e.g., Jantzi) which evaluate corporations through the lens of CSR, thus going beyond traditional environmental indicators. However, is this trend beneficial to investors? We investigate whether social disclosure and environmental disclosure substitute or complement each other in reducing information asymmetry between managers and investors, taking into account a firm‟s environmental performance and governance attributes. Our findings suggest that social disclosure and environmental disclosure substitute each other in reducing stock market asymmetry, as proxied by share price volatility. Our results also show that the reduction in share price volatility is higher for economic (hard) environmental disclosure than for generic (soft) environmental disclosure. Hence, future research in CSR disclosure may fruitfully distinguish between social and environmental disclosures as well as between hard (economic-based) and soft environmental information. |
| Keywords: | Environmental disclosure, governance attributes, information asymmetry, social disclosure. |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-00481571_v1&r=env |
| By: | Grischa Perino (School of Economics, University of East Anglia) |
| Abstract: | This paper compares taxes and tradable permits when used to regulate a competitive and polluting downstream industry that can purchase an abatement technology from a monopolistic upstream industry. Second-best policies are derived for the full range of the abatement technology's emission intensities and marginal abatement costs. The second-best permit quantity can be both above or below the socially optimal emission level. Explicit consideration of the output market provides further insights on how market power distorts the allocation in the downstream industry. The ranking between permits and taxes is ambiguous in general, but taxes weakly dominate permits if full diffusion is socially optimal. In addition, it is analysed how a cap on the permit price affects the diffusion of an abatement technology. |
| Keywords: | diffusion, market power, price bounds, taxes, tradable permits |
| JEL: | D40 L10 |
| Date: | 2010–04–21 |
| URL: | http://d.repec.org/n?u=RePEc:uea:aepppr:2010_05&r=env |
| By: | Murty, Sushama (Department of Economics, University of Warwick) |
| Abstract: | Five attributes of emission generating technologies are identified and a concept of byproduction is introduced, which implies these five attributes. Murty and Russell [2010] characterization of technologies, which requires distinguishing between intended production of firms and nature's laws of emission generation, is shown to be both necessary and sufficient for by-production. While intended production could be postulated to satisfy standard input and output free-disposability, these will necessarily be violated by nature's emission generation mechanism, which satisfies costly disposability of emission as defined in Murty [2010]. Marginal technical and economic costs of abatement are derived for technologies exhibiting by-production. A simple model of by-production illustrates that, while common abatement paths considered in the literature do involve a technological trade off between emission reduction and intended production, there also almost always exist abatement paths where it is possible to have both geater emission reductions and greater intended outputs. Further, marginal abatement costs will usually be decreasing in the initial level of emissions of firms. Counterintuitive as these results may sound in the rst instance, they are intuitively obvious in the by-production approach as it is rich enough to incorporate both standard economic assumptions with respect to intended production of firms and the rules of nature that govern emission generation. |
| Keywords: | theory of a firm ; technology ; input and output free-disposability ; diminishing returns to inputs ; joint production ; emission-generation ; marginal abatement cost |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:wrk:warwec:934&r=env |
| By: | Antoci, Angelo; Borghesi, Simone |
| Abstract: | In modern societies individuals often try to alleviate their personal damages from environmental degradation by increasing their consumption of private goods. Although this “self-protective” behavior is very frequent in industrial economies, insufficient attention has been paid to its economic and environmental consequences. In this paper we show that such a behavior can give rise to a self-reinforcing growth process in which environmental degradation increases economic growth and vice-versa, leading the economy on a welfare-reducing path. For this purpose, we first provide several examples of environmental self-protective choices to give a heuristic view of this phenomenon and then examine their effects through a two-islands evolutionary model that leads the reader beyond a purely intuitive understanding of the argument. Although the proposed model is deliberately very simple, it may provide some interesting insights on an aspect that has been mainly ignored in the literature so far. |
| Keywords: | Self-protective choices; defensive expenditures; environmental degradation; negative externalities; economic growth. |
| JEL: | O10 Q01 Q20 |
| Date: | 2010–05 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:22580&r=env |
| By: | Raouf BOUCEKKINE (UNIVERSITE CATHOLIQUE DE LOUVAIN, Department of Economics and Core, Univerity of Glasgow, Department of Economics); Natali HRITONENKO (Prairie View A&M University, USA); Yuri YATSENKO (Houston Baptist University, USA) |
| Abstract: | This paper studies to which extent a firm using a scarce resource input and facing environmental regulation, can still manage to have a sustainable growth of output and profits. The firm has a vintage capital technology with two complementary factors, capital and a resource input subject to quota, the latter being increasingly scarce through an exogenously rising price. The firm can scrap obsolete capital and invest in adoptive and/or innovative R&D resource-saving activities. We show that there exists a threshold level for the growth rate of the resource price above which the firm will collapse. Below this threshold, two important properties are found. In the long-run, a sustainable growth is possible at a growth rate which is independent of the resource price. In the short-run, not only will the firms respond to increasing resource price by increasing R&D on average, but they will also reduce capital expenditures and speed up the scrapping of older capital goods. Finally, we identify optimal intensive Vs extensive transitional growth regimes depending on the history of the firms. |
| Keywords: | Vintage capital, technological progress, dynamic optimization, Sustainability, scarcity, environmental regulation |
| JEL: | C61 D21 D92 O33 Q01 |
| Date: | 2010–03–19 |
| URL: | http://d.repec.org/n?u=RePEc:ctl:louvir:2010010&r=env |
| By: | Horatiu Rus (Department of Economics, University of Waterloo) |
| Abstract: | Industrial pollution often exerts negative spillovers on resource-based productive sectors. International trade creates conditions for the overexploitation of an open-access renewable resource, but also provides opportunities for separating the productive sectors spatially. The existing literature suggests that a diversified exporter of the renewable resource good tends to lose from trade due to over-depletion, while the exporter of the non-resource good gains. This paper shows that, depending on the relative damage inflicted by the two industries on the environment, it is possible that the production externality will persist and that specialization in the manufacturing/dirty good may not be the optimal choice from a welfare perspective. In addition, the resource exporter does not necessarily have to lose from trade even when specializing incompletely, due to the partially offsetting external effects. |
| JEL: | Q27 Q22 Q53 |
| Date: | 2010–05 |
| URL: | http://d.repec.org/n?u=RePEc:wat:wpaper:1006&r=env |
| By: | Marc Journeault (Université Laval - Université Laval) |
| Abstract: | Alors qu'une littérature grandissante a examiné et démontré une influence directe de l'adoption des outils d'éco-contrôle sur la performance organisationnelle, peu de recherches ont tenté de comprendre la façon dont cette influence s'opérationnalise au sein des organisations. Se basant sur la Natural Resourced-Based View, l'objectif de cet article est d'ouvrir cette boite noire et d'examiner le potentiel des outils d'éco-contrôles à supporter les compétences environnementales et d'en analyser l'impact sur la performance environnementale et économique de l'organisation. |
| Keywords: | Outis d'éco-contrôle, Natural resourcedbased view, compétences environnementales, systèmes de mesures de la performance environnementale, performance environnementale |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-00481559_v1&r=env |
| By: | Ryan, Anthony M.; Spash, Clive L. |
| Abstract: | A psychological interpretation of willingness to pay (WTP) bids arising from the Contingent Valuation Method (CVM) claims they represent a general contribution towards environmental causes rather than a personal economic valuation. Yet the evidence supporting this contribution model has been criticised for using group mean correlations to draw conclusions about individual motives. This paper avoids this problem by examining motives at an individual level. Evidence reported shows the need to qualify the role of the attitudinal explanation. Some, but not all, positive WTP bids are found to be based on contributory rather than economic motives, while the decision to bid zero or positive appears to represent a general psychological appraisal rather than being purely related to attitudes. |
| Keywords: | Contingent Valuation Method; Social Psychology; Environmental Valuation |
| JEL: | A13 H41 Q51 |
| Date: | 2010–05 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:22468&r=env |
| By: | Horatiu Rus (Department of Economics, University of Waterloo) |
| Abstract: | The link between natural resource dependence and internal conflict has been approached from a variety of angles in a large and growing interdisciplinary literature. While there is an expanding consensus as to what matters the most for such intra-state violence episodes, the feasibility - discontent dichotomy still appears to characterize a disciplinary divide between economists and political scientists. This paper attempts to help bridge the gap by allowing for both intrinsic and extrinsic motivations of potential rebels. Simple non-cooperative bargaining yields a nonlinear impact of regulatory quality on the likelihood of conflict and shows that corruption and resource depletion jointly affect the outcome. The empirical analysis that follows looks at the effect of environmental depletion and government corruption on the emergence of civil conflicts using a large panel dataset. Resource depletion, the quality of governance and their interaction are found to be significant determinants of civil conflictincidence. Results are robust to several steps taken to address potential endogeneity concerns. |
| JEL: | Q27 Q56 D74 H56 |
| Date: | 2010–05 |
| URL: | http://d.repec.org/n?u=RePEc:wat:wpaper:1007&r=env |
| By: | Svetlana Batrakova (University College Dublin); Ronald B Davies (University College Dublin) |
| Abstract: | One of the greatest concerns over globalisation is its impact on the environment. This paper contributes to this debate by analysing the consequences of becoming an exporter on a firm's energy consumption. We show both theoretically and empirically that for low fuel intensity firms exporting status is associated with higher fuel consumption while for high fuel intensity firms exporting is results in decreased fuel consumption. Further analysis reveals that higher fuel consumption of low fuel intensity firms occurs after exporting, perhaps as a response to increased production. In contrast, firms using relatively large quantities of fuel decrease their energy use after exporting, perhaps by adopting more fuel-efficient technology. These results indicate that the use of aggregate data, as is the case in almost all studies of trade and the environment, is likely to conceal important connections between the two. |
| Keywords: | Exporting, Energy, Heterogeneity, Quantiles, Matching |
| Date: | 2010–03–31 |
| URL: | http://d.repec.org/n?u=RePEc:ucn:wpaper:201007&r=env |
| By: | Försund, Finn (University of Oslo); Hjalmarsson, Lennart (Department of Economics, School of Business, Economics and Law, Göteborg University) |
| Abstract: | To achieve a stable and reliable electricity supply, efficient provision of reserve capacity or, more generally, ancillary services is crucial. Because of the expansion of wind power with random variation in supply, and expected environmental restrictions in hydropower operation causing reductions in regulated hydropower capacity, the balancing power and system reliability issues have become topical in Scandinavia. Moreover, there seems to be a wide-spread opinion that increase in wind-power generation will lead to increased demand for regulating power, much higher prices for reserves and a much higher value of regulated hydro power. Thus, this chapter deals with the value of balance regulation power, or electricity reserves, in the Nordic electricity market, and we will address the issue of the future value of electricity reserves, hydro capacity in particular, that could be used either for energy production or to balance power production, and more generally discuss the value of balancing power in the Nordic electricity system. In the first, theoretical, part of this study we will apply a simple dynamic electricity generation model, involving hydropower, thermal power and wind power to derive the value of the water in a dam of a hydropower plant. In the second, more empirically oriented, part we will address a number of issues related to balance regulation and the value of balancing power with focus on the Nordic electricity market and against the background of an expanding generation capacity of intermittent renewable electricity, especially wind power.<p> |
| Keywords: | Electricity; ancillary services; reserve capacity; regulating power; wind power |
| JEL: | L94 Q40 Q51 |
| Date: | 2010–05–04 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:gunwpe:0441&r=env |
| By: | Morgan Kelly (University College Dublin); Cormac Ó Gráda (University College Dublin) |
| Abstract: | We investigate by how much the Little Ice Age reduced the harvests on which pre-industrial Europeans relied for survival. We find that weather strongly affected crop yields, but can find little evidence that western Europe experienced long swings or structural breaks in climate. Instead, annual summer temperature reconstructions between the fourteenth and twentieth centuries behave as almost independent draws from a distribution with a constant mean but time varying volatility; while winter temperatures behave similarly until the late nineteenth century when they rise markedly, consistent with anthropogenic global warming. Our results suggest that the existing consensus about a Little Ice Age in western Europe stems from a Slutsky effect, where the standard climatological practice of smoothing data prior to analysis induces spurious cyclicality in uncorrelated data. |
| Date: | 2010–04–19 |
| URL: | http://d.repec.org/n?u=RePEc:ucn:wpaper:201014&r=env |
| By: | He, Haoran (Department of Economics, School of Business, Economics and Law, Göteborg University) |
| Abstract: | This study investigates the validity of using stated preference (SP) estimates to predict policy effects on plastic bag consumption. Before implementation of a plastic bag regulation, when bags were still free of charge, we utilized an SP survey to elicit consumers’ contingent bag consumption in certain possible pricing scenarios. Following implementation of the regulation mandating charging for bags, we conducted another survey to collect actual consumption information. We thus have unique data to compare stated and revealed consumption. The comparison results show that consumers’ behavioral reactions to a policy change can be predicted reasonably well with SP techniques.<p> |
| Keywords: | China; contingent behavior; external validity; plastic bags; revealed behavior; stated preference |
| JEL: | C91 D12 Q53 |
| Date: | 2010–05–06 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:gunwpe:0444&r=env |
| By: | Matti Liski; Pauli Murto |
| Abstract: | Energy costs are notoriously uncertain but what is the effect of this on energysaving investments? We find that real-option frictions imply a novel equilibrium response to increasing but uncertain energy costs: early investments are cautious but ultimately real-option frictions endogenously vanish, and the activity affected by higher energy costs fully recovers. We use electricity market data for counterfactual analysis of the real-option mark-ups and policy experiments. Uncertainty alone implies that the early compensation to new technologies exceeds entry costs by multiple factors, and that uncertainty-reducing subsidies to green energy can benefit the consumer side at the expense of the old capital rents, even in the absence of externalities from energy use. |
| Date: | 2010–03 |
| URL: | http://d.repec.org/n?u=RePEc:mee:wpaper:1005&r=env |
| By: | Benjamin Alarie (University of Toronto); Finn Poschmann (C.D. Howe Institute) |
| Abstract: | Canadian provincial governments have broad authority to impose direct taxes by passing enabling legislation in their respective legislatures. Governments may also use regulation to set fees, for example, to recover the cost of services they provide, but cannot use regulation to impose taxes that raise general revenue. Doing so would be unconstitutional. Governments nonetheless sometimes attempt to raise revenue by imposing levies that are deliberately mislabelled as “fees” – past efforts to do so have exposed provincial governments to successful constitutional challenges. This e-brief examines problematic example: the Ontario government recently ordered the Ontario Energy Board to impose a “fee” to be used to fund activities of the Ministry of Energy and Infrastructure; this fee is quite likely an unconstitutional tax. |
| Keywords: | Governance and Public Institutions, Ontario Energy Board, Independent Electricity System Operator (IESO), taxation, regulation, unconstitutional tax |
| JEL: | H25 H41 H71 L94 |
| Date: | 2010–04 |
| URL: | http://d.repec.org/n?u=RePEc:cdh:ebrief:98&r=env |
| By: | Nirupama S. Rao |
| Abstract: | Rapid increases in oil prices in 2008 led some to call for special taxes on the oil industry. Because oil is an exhaustible resource, however, the effects of excise taxes on production or on reported producer profits may be more complex than in many other markets. This paper uses well-level production data on California oil wells for the period 1977-2008, along with the rich variation in producer prices induced by federal oil taxes and pre-1980 price controls, to estimate how temporary taxes affect oil production decisions. Theory suggests that temporary taxes could lead producers to shut wells, and more generally that they create strong incentives for retiming production to minimize tax burdens. The empirical estimates suggest small estimates of extensive responses to after-tax prices, meaning that wells are rarely shut, but they also suggest substantial retiming of production for operating wells. While the estimates vary with specifications, the elasticity of oil production with respect to the after-tax price is estimated to fall between 0.208 and 0.261. The estimates are used to calibrate a simple model of the efficiency cost of tax-induced distortions relative to the no-tax optimal extraction path. These calculations suggest that a 15 percent temporary excise tax on California oil producers reduces the present value of producer surplus by between one and five percent of the no-tax surplus or between 113 and 166 percent of the government revenue raised, depending on the original life of the well and the duration of the temporary tax. |
| Date: | 2010–04 |
| URL: | http://d.repec.org/n?u=RePEc:mee:wpaper:1006&r=env |