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on Resource Economics |
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Issue of 2017‒06‒25
two papers chosen by |
| By: | Aronsson, Thomas (Department of Economics, Umeå University); Sjögren, Tomas (Department of Economics, Umeå University) |
| Abstract: | This paper surveys research on optimal redistributive taxation in economies with environmental externalities. A major question is whether externality correction only motivates an adjustment of the tax policy rule for the externality-generating activity, or whether the marginal value of the externality directly enters the policy rules for other tax instruments as well. In a static benchmark model with an atmospheric consumption externality, where the government uses a mix of a nonlinear income tax and linear commodity taxes, we show that Sandmo’s (1975) additivity property applies. This means that externality correction leads to an additional term (measuring the marginal value of the externality) in the commodity tax formula for the externality generating good, while the policy rules for commodity taxation of clean goods and marginal income taxation take the same form as in the absence of any externality. We also extend this benchmark model to capture a number of scenarios (such as non-atmospheric externalities, border trade in the externality generating good, and competition between governments in a multi-country framework), where the additivity property no longer applies. We end by examining an intertemporal model of optimal taxation with a stock-externality, allowing us to integrate the study of optimal redistributive taxation with literature on environmental economics and policy based on dynamic models. |
| Keywords: | Environmental externalities; optimal taxation; redistribution; income taxation; commodity taxation |
| JEL: | D60 D62 H21 H23 Q51 |
| Date: | 2017–06–19 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:umnees:0950&r=res |
| By: | Jan Abrell (ETH Zurich, Switzerland); Mirjam Kosch (ETH Zurich, Switzerland); Sebastian Rausch (ETH Zurich, Switzerland) |
| Abstract: | This paper exploits the randomness and exogeneity of weather conditions to identify the economic cost of decarbonization through renewable energy (RE) support policies. We find that both the aggregate cost and the distribution of cost between energy producers and consumers vary significantly depending on which type of RE technology is promoted reflecting substantial heterogeneity in production cost, temporal availability of natural resources, and market conditions (i.e., time-varying demand, carbon intensity of installed production capacities, and opportunities for cross-border trade). We estimate that the cost for reducing one ton of CO2 emissions through subsidies for solar are EUR 500-1870. Subsidizing wind entails significantly lower cost, which can even be slightly negative, ranging from EUR 5-230. While the economic rents for energy producers always decrease, consumers incur three to five times larger costs when solar is promoted but gain under RE policies promoting wind. |
| Keywords: | Decarbonization, Renewable Energy Policies, Wind, Solar, Electricity, Economic Cost, Distributional impacts |
| JEL: | Q28 Q48 Q54 L94 C01 |
| Date: | 2017–06 |
| URL: | http://d.repec.org/n?u=RePEc:eth:wpswif:17-273&r=res |