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GTAP Resource #1472

"Is there a Role for Domestic Energy Taxes under Emission Trading?"
by Honkatukia, Juha, Juha Forsström and Eero Tamminen

This report studies the use of domestic energy taxes in the trading sectors in connection with EU-wide emissions trading. The report evaluates three distinct tax scenarios that progressively switch further away from current fuel taxes and compensate the initial loss of revenue by raising either income taxes or electricity taxes. Grandfathering is based on estimated domestic reductions under current energy taxes or under carbon dioxide taxes. The results indicate that macroeconomic effects are highest if revenue neutrality is maintained with income tax increases. It makes less of a difference on the macroeconomic level if current energy taxes are retained in the trading sectors or if they are abolished and electricity taxes raised to compensate for lost revenue. At the sectoral level, however, the electricity tax alternative is less costly for the trading sectors. Grandfathering has a large impact on the effects of emission trading, since it determines the required reductions for the non-trading sectors. If the goal for the non-trading sectors is too strict, macroeconomic costs are raised regardless of emission trading. Trading also has an effect on the use of renewable energy. High permit prices are required to encourage wind power, whereas the use of wood increases in all cases.

Resource Details (Export Citation) GTAP Keywords
Category: 2004 Conference Paper
Status: Published
By/In: Presented at the 7th Annual Conference on Global Economic Analysis, Washington DC, USA
Date: 2004
Version: 1
Created: Vaittinen, R. (4/30/2004)
Updated: Bacou, M. (6/4/2004)
Visits: 2,346
No keywords have been specified.

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