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GTAP Resource #3309

"The Effects of Energy Taxes on Energy Consumption in Finland between 1995 and 2004"
by Honkatukia, Juha and Kimmo Marttila

The study evaluates the effects of energy taxes on energy use in the period 1995 to 2004. The choice of the period is affected by several factors: there were considerable increases in energy taxes between 1995 and 2004; the emphasis on taxation also changed between the two years from an up-stream tax on primary energy and fossil fuels in 1995 to a mixed system with taxes placed both on primary energy carriers as well as electricity and fossil fuels in 2004; finally, after 2004, the EU emission trading system lead to yet another change in effective energy taxation, lending comparisons to earlier years more difficult. The 1995 and 2004 energy taxes are described in detail in chapter three of the study.
The study uses an AGE model to assess the impacts of both the macroeconomic and the specific changes that have occurred in the period under study. In the historical simulation, we start from data for 1995 and use the observed changes between 1995 and 2004 in a large number of variables as inputs in the model to carry the economy to 2004. The changes in the model’s structural parameters can then be used to explain the contributions of each of the observed changes to the differences between the 1995 and 2004 economy, and to decompose the otherwise intangible overall effects into contributions of several factors, including taxes.
We find that the sharp increases in energy prices since 1995 have restricted the growth of energy demand in a very significant way. Energy taxes, on the other hand, while raised markedly in specific terms especially in the late 1990s, have had a more mixed record. They have been effective in curbing the growth of electricity consumption and, in many industries, the overall growth of energy consumption. However, in the case of transport fuels, the effective tax rate has actually fallen as the price net of tax has increased over time. For these fuels, it is the price increase rather than the taxes that seem to have slowed down consumption.

Resource Details (Export Citation) GTAP Keywords
Category: 2010 Conference Paper
Status: Published
By/In: Presented at the 13th Annual Conference on Global Economic Analysis, Penang, Malaysia
Date: 2010
Created: Honkatukia, J. (4/15/2010)
Updated: Batta, G. (4/16/2010)
Visits: 2,016
- Economic growth
- Technological change
- Climate change policy
- Calibration and parameter estimation
- Europe (Northern)

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