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

Author

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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:

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    3. 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.
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    6. Anton Orlov & Harald Grethe, 2012. "Carbon Taxation in Russia: Relevance of Export Taxes on Energy Resources," EcoMod2012 4117, EcoMod.
    7. Miriam Frey, 2017. "Assessing the impact of a carbon tax in Ukraine," Climate Policy, Taylor & Francis Journals, vol. 17(3), pages 378-396, April.
    8. Orlov, Anton & Grethe, Harald, 2012. "Carbon taxation and market structure: A CGE analysis for Russia," Energy Policy, Elsevier, vol. 51(C), pages 696-707.
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