IDEAS home Printed from https://ideas.repec.org/a/aen/eeepjl/eeep3_2_05parry.html
   My bibliography  Save this article

How Should Different Countries Tax Fuels to Correct Environmental Externalities?

Author

Listed:
  • Ian Parry, Dirk Heine, Shanjun Li, and Eliza Lis

Abstract

This essay discusses (based on a recent IMF study) how developed and developing countries alike might put into practice the principle of 'getting prices right' to address the major externalities from energy. The efficient set of taxes includes charges on fuel use for carbon and local pollution (with credits for emissions capture during combustion) and additional charges on motor fuels for road congestion and accidents (though the latter should transition to distance-based charges). Techniques and data sources for measuring the externalities and corrective taxes by country are discussed. In general, heavy taxes on coal and motor fuels are warranted (though there is substantial cross-country variation in corrective tax rates). For most countries, tax reform could yield considerable fiscal, health, and carbon benefits.

Suggested Citation

  • Ian Parry, Dirk Heine, Shanjun Li, and Eliza Lis, 2014. "How Should Different Countries Tax Fuels to Correct Environmental Externalities?," Economics of Energy & Environmental Policy, International Association for Energy Economics, vol. 0(Number 2).
    • Handle: RePEc:aen:eeepjl:eeep3_2_05parry
    as

    Download full text from publisher

    File URL: http://www.iaee.org/en/publications/eeeparticle.aspx?id=68
    Download Restriction: Access to full text is restricted to IAEE members and subscribers.
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Cropper, Maureen & Gamkhar, Shama & Malik, Kabir & Limonov, Alex & Partridge, Ian, 2012. "The Health Effects of Coal Electricity Generation in India," RFF Working Paper Series dp-12-25, Resources for the Future.
    2. Ian W. H. Parry & Kenneth A. Small, 2005. "Does Britain or the United States Have the Right Gasoline Tax?," American Economic Review, American Economic Association, vol. 95(4), pages 1276-1289, September.
    3. Ian W. H. Parry & Kenneth A. Small, 2009. "Should Urban Transit Subsidies Be Reduced?," American Economic Review, American Economic Association, vol. 99(3), pages 700-724, June.
    4. Lawrence H. Goulder & Ian W. H. Parry, 2008. "Instrument Choice in Environmental Policy," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 2(2), pages 152-174, Summer.
    5. Carolyn Fischer & Winston Harrington & Ian W.H. Parry, 2007. "Should Automobile Fuel Economy Standards be Tightened?," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4), pages 1-30.
    6. Cameron Hepburn, 2006. "Regulation by Prices, Quantities, or Both: A Review of Instrument Choice," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 22(2), pages 226-247, Summer.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Beaudoin, Justin & Chen, Yuan & Heres, David R. & Kheiravar, Khaled H. & Lade, Gabriel E. & Yi, Fujin & Zhang, Wei & Lin Lawell, C.-Y. Cynthia, 2018. "Environmental Policies in the Transportation Sector: Taxes, Subsidies, Mandates, Restrictions, and Investment," ISU General Staff Papers 201808150700001050, Iowa State University, Department of Economics.
    2. Irina, NASALCIUC, 2016. "Economic Aspects Of Fossil Fuel Social Costs. Why Do We Subsidize And Mediate The Cliamte Change Process?," Contemporary Economy Journal, Constantin Brancoveanu University, vol. 1(4), pages 133-147.
    3. Benedict Clements & David Coady & Stefania Fabrizio & Sanjeev Gupta & Baoping Shang, 2014. "Energy subsidies: How large are they and how can they be reformed?," Economics of Energy & Environmental Policy, International Association for Energy Economics, vol. 0(Number 1).
    4. Lucas W. Davis, 2017. "The Environmental Cost of Global Fuel Subsidies," The Energy Journal, International Association for Energy Economics, vol. 0(KAPSARC S).
    5. Xiang, Hongjin & Kuang, Yanxiang, 2020. "Who benefits from China’s coal subsidy policies? A computable partial equilibrium analysis," Resource and Energy Economics, Elsevier, vol. 59(C).
    6. Si, Shuyang & Lyu, Mingjie & Lin Lawell, C.-Y. Cynthia & Chen, Song, 2018. "The effects of energy-related policies on energy consumption in China," Energy Economics, Elsevier, vol. 76(C), pages 202-227.
    7. Xiaolin Wang & Xiangyi Lu & Na Zhou & Jianzhong Xiao & Jun Chen, 2020. "Does Environmental Regulation Affect Natural Gas Consumption? Evidence from China with Spatial Insights," Sustainability, MDPI, vol. 12(8), pages 1-18, April.
    8. Simon Black & Grzegorz Peszko & Alexandrina Platonova-Oquab & Dirk Heine & Govinda Timilsina, 2019. "Environmental Fiscal Reform in Morocco," World Bank Publications - Reports 34030, The World Bank Group.
    9. Michelle Harding & Chiara Martini & Alastair Thomas, 2014. "Taxing Energy Use in the OECD," Economics of Energy & Environmental Policy, International Association for Energy Economics, vol. 0(Number 1).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Proost, Stef & Van Dender, Kurt, 2012. "Energy and environment challenges in the transport sector," Economics of Transportation, Elsevier, vol. 1(1), pages 77-87.
    2. Tscharaktschiew, Stefan, 2014. "Shedding light on the appropriateness of the (high) gasoline tax level in Germany," Economics of Transportation, Elsevier, vol. 3(3), pages 189-210.
    3. Rik L. Rozendaal & Herman R. J. Vollebergh, 2021. "Policy-Induced Innovation in Clean Technologies: Evidence from the Car Market," CESifo Working Paper Series 9422, CESifo.
    4. Santos, Georgina & Behrendt, Hannah & Maconi, Laura & Shirvani, Tara & Teytelboym, Alexander, 2010. "Part I: Externalities and economic policies in road transport," Research in Transportation Economics, Elsevier, vol. 28(1), pages 2-45.
    5. Parry, Ian W.H., 2012. "Reforming the tax system to promote environmental objectives: An application to Mauritius," Ecological Economics, Elsevier, vol. 77(C), pages 103-112.
    6. Elisabetta Cornago & Renaud Foucart, 2014. "Instrument Choice and Cost Uncertainty in the Electricity Market," Working Papers ECARES ECARES 2014-13, ULB -- Universite Libre de Bruxelles.
    7. Eskeland, Gunnar S. & Mideksa, Torben K., 2008. "Transportation fuel use, technology and standards: The role of credibility and expectations," Policy Research Working Paper Series 4695, The World Bank.
    8. Kuppusamy, Saravanan & Magazine, Michael J. & Rao, Uday, 2023. "Impact of downstream emissions cap-and-trade policy on electric vehicle and clean utility adoption," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 180(C).
    9. Ian Parry, 2013. "Fiscal instruments for climate finance," Chapters, in: Roger Fouquet (ed.), Handbook on Energy and Climate Change, chapter 16, pages 377-402, Edward Elgar Publishing.
    10. Parry, Ian W.H., 2008. "How should heavy-duty trucks be taxed?," Journal of Urban Economics, Elsevier, vol. 63(2), pages 651-668, March.
    11. Hirte, Georg & Tscharaktschiew, Stefan, 2018. "The impact of anti-congestion policies and the role of labor-supply margins," CEPIE Working Papers 04/18, Technische Universität Dresden, Center of Public and International Economics (CEPIE).
    12. Simon Dietz & Samuel Fankhauser, 2010. "Environmental prices, uncertainty, and learning," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 26(2), pages 270-284, Summer.
    13. Heimvik, Arild & Amundsen, Eirik S., 2021. "Prices vs. percentages: Use of tradable green certificates as an instrument of greenhouse gas mitigation," Energy Economics, Elsevier, vol. 99(C).
    14. Tscharaktschiew, Stefan & Reimann, Felix, 2021. "On employer-paid parking and parking (cash-out) policy: A formal synthesis of different perspectives," Transport Policy, Elsevier, vol. 110(C), pages 499-516.
    15. Mogens Fosgerau & Kurt Van Dender, 2013. "Road pricing with complications," Transportation, Springer, vol. 40(3), pages 479-503, May.
    16. Benjamin Jones & Michael Keen & Jon Strand, 2013. "Fiscal implications of climate change," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 20(1), pages 29-70, February.
    17. Parry, Ian, 2015. "Designing Fiscal Policy to Address the External Costs of Energy," International Review of Environmental and Resource Economics, now publishers, vol. 8(1), pages 1-56, May.
    18. Lucas W. Davis, 2017. "The Environmental Cost of Global Fuel Subsidies," The Energy Journal, International Association for Energy Economics, vol. 0(KAPSARC S).
    19. Buchholz Wolfgang & Heindl Peter, 2015. "Ökonomische Herausforderungen des Klimawandels," Perspektiven der Wirtschaftspolitik, De Gruyter, vol. 16(4), pages 324-350, December.
    20. Li, Shanjun & Kahn, Matthew E. & Nickelsburg, Jerry, 2015. "Public transit bus procurement: The role of energy prices, regulation and federal subsidies," Journal of Urban Economics, Elsevier, vol. 87(C), pages 57-71.

    More about this item

    JEL classification:

    • F0 - International Economics - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:aen:eeepjl:eeep3_2_05parry. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: David Williams (email available below). General contact details of provider: https://edirc.repec.org/data/iaeeeea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.