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Environmental Taxation and Induced Structural Change in an Open Economy: The Role of Market Structure

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  • Böhringer Christoph

    (University of Oldenburg, Ammerländer Heerstraße,Oldenburg, Germany)

  • Löschel Andreas

    (Centre for European Economic Research (ZEW),Mannheim, Germany)

  • Welsch Heinz

    (University of Oldenburg, Ammerländer Heerstraße,Oldenburg, Germany)

Abstract

Studies of structural change induced by environmental taxation usually proceed in a perfect-competition framework and typically find structural change to be quite moderate under realistic emission reduction scenarios. By observing that some of the industries affected are likely to operate under imperfect rather than perfect competition, additional mechanisms emerge which may amplify structural change beyond the extent identified as yet. Especially, changes in economies of scale may arise which weaken or strengthen the competitive position of industries over and above the initial cost effect. Using a computable general equilibrium model for Germany to examine the effects of a unilaterally introduced carbon tax, we find that induced structural change is more pronounced under imperfect competition than under perfect competition. At the macroeconomic level, we find that aggregate losses in economies of scale are larger than aggregate gains, implying that the total costs of environmental regulation are higher under imperfect competition than under perfect competition.

Suggested Citation

  • Böhringer Christoph & Löschel Andreas & Welsch Heinz, 2008. "Environmental Taxation and Induced Structural Change in an Open Economy: The Role of Market Structure," German Economic Review, De Gruyter, vol. 9(1), pages 17-40, February.
    • Handle: RePEc:bpj:germec:v:9:y:2008:i:1:p:17-40
    DOI: 10.1111/j.1468-0475.2008.00421.x
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    Cited by:

    1. Miriam Frey, 2017. "Assessing the impact of a carbon tax in Ukraine," Climate Policy, Taylor & Francis Journals, vol. 17(3), pages 378-396, April.
    2. Böhringer, Christoph & Garcia-Muros, Xaquin & Cazcarro, Ignacio & Arto, Iñaki, 2017. "The efficiency cost of protective measures in climate policy," Energy Policy, Elsevier, vol. 104(C), pages 446-454.
    3. Kenneth Castellanos & Garth Heutel, 2024. "Unemployment, Labor Mobility, and Climate Policy," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 11(1), pages 1-40.
    4. Florian Habermacher, 2015. "Carbon Leakage: A Medium- and Long-Term View," CESifo Working Paper Series 5216, CESifo.
    5. Orlov, Anton & Grethe, Harald, 2012. "Carbon taxation and market structure: A CGE analysis for Russia," Energy Policy, Elsevier, vol. 51(C), pages 696-707.
    6. Orlov, Anton & Grethe, Harald & McDonald, Scott, 2013. "Carbon taxation in Russia: Prospects for a double dividend and improved energy efficiency," Energy Economics, Elsevier, vol. 37(C), pages 128-140.
    7. Alexeeva-Talebi, Victoria & Böhringer, Christoph & Löschel, Andreas & Voigt, Sebastian, 2012. "The value-added of sectoral disaggregation: Implications on competitive consequences of climate change policies," Energy Economics, Elsevier, vol. 34(S2), pages 127-142.
    8. Rakotoarisoa, Manitra A., 2011. "A Contribution to the Analyses of the Effects of Foreign Agricultural Investment on the Food Sector and Trade in Sub-Saharan Africa," Conference papers 332037, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    9. Proença, Sara & St. Aubyn, Miguel, 2013. "Hybrid modeling to support energy-climate policy: Effects of feed-in tariffs to promote renewable energy in Portugal," Energy Economics, Elsevier, vol. 38(C), pages 176-185.
    10. Böhringer, Christoph & Keller, Andreas & van der Werf, Edwin, 2013. "Are green hopes too rosy? Employment and welfare impacts of renewable energy promotion," Energy Economics, Elsevier, vol. 36(C), pages 277-285.
    11. Anton Orlov & Harald Grethe, 2012. "Carbon Taxation in Russia: Relevance of Export Taxes on Energy Resources," EcoMod2012 4117, EcoMod.

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