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Double dividend effectiveness of energy tax policies and the elasticity of substitution: A CGE appraisal

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  • Sancho, Ferran

Abstract

There is a considerable body of literature that has studied whether or not an adequately designed tax swap, whereby an ecotax is levied and some other tax is reduced while keeping government income constant, may achieve a so-called double dividend, that is, an increase in environmental quality and an increase in overall efficiency. Arguments in favor and against are abundant. Our position is that the issue should be empirically studied starting from an actual, non-optimal tax system structure and by way of checking the responsiveness of equilibria to revenue neutral tax regimes under alternate scenarios regarding technological substitution. With the use of a CGE model, we find that the most critical elasticity for achieving a double dividend is the substitution elasticity between labor and capital whereas the elasticity that would generate the highest reduction in carbon dioxide emissions is the substitution elasticity among energy goods.

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  • Sancho, Ferran, 2010. "Double dividend effectiveness of energy tax policies and the elasticity of substitution: A CGE appraisal," Energy Policy, Elsevier, vol. 38(6), pages 2927-2933, June.
  • Handle: RePEc:eee:enepol:v:38:y:2010:i:6:p:2927-2933
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    Cited by:

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    4. Manzoor, Davood & Haqiqi, Iman, 2013. "Impacts of Energy Price Increase and Cash Subsidy Payments on Energy Demand," MPRA Paper 95826, University Library of Munich, Germany.
    5. Perrier, Quentin & Quirion, Philippe, 2018. "How shifting investment towards low-carbon sectors impacts employment: Three determinants under scrutiny," Energy Economics, Elsevier, vol. 75(C), pages 464-483.
    6. Geir H. Bjertnæs & Marina Tsygankova & Thomas Martinsen, 2012. "The double dividend in the presence of abatement technologies and local external effects," Discussion Papers 691, Statistics Norway, Research Department.
    7. Langarita, Raquel & Duarte, Rosa & Hewings, Geoffrey & Sánchez-Chóliz, Julio, 2019. "Testing European goals for the Spanish electricity system using a disaggregated CGE model," Energy, Elsevier, vol. 179(C), pages 1288-1301.
    8. Ángel Estrada & Daniel Santabárbara, 2021. "Recycling carbon tax revenues in Spain. Environmental and economic assessment of selected green reforms," Working Papers 2119, Banco de España.
    9. Dania Ortiz & Vítor Leal, 2020. "Energy Policy Concerns, Objectives and Indicators: A Review towards a Framework for Effectiveness Assessment," Energies, MDPI, vol. 13(24), pages 1-26, December.
    10. Sun, Yuanyuan & Mao, Xianqiang & Liu, Gengyuan & Yin, Xinan & Zhao, Yanwei, 2020. "Modelling the effects of energy taxes on ecological footprint transfers in China's foreign trade," Ecological Modelling, Elsevier, vol. 431(C).
    11. 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.
    12. Yajie Liu & Feng Dong, 2019. "How Industrial Transfer Processes Impact on Haze Pollution in China: An Analysis from the Perspective of Spatial Effects," IJERPH, MDPI, vol. 16(3), pages 1-27, February.
    13. Hu, Haisheng & Zhao, Laijun & Dong, Wanhao, 2023. "How to achieve the goal of carbon peaking by the energy policy? A simulation using the DCGE model for the case of Shanghai, China," Energy, Elsevier, vol. 278(PA).
    14. 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.
    15. Mardones, Cristian & Ortega, José, 2021. "Are the emissions trading systems’ simulations generated with a computable general equilibrium model sensitive to the nested production structure?," Applied Energy, Elsevier, vol. 298(C).
    16. Anton Orlov & Harald Grethe, 2012. "Carbon Taxation in Russia: Relevance of Export Taxes on Energy Resources," EcoMod2012 4117, EcoMod.
    17. Orlov, Anton & Grethe, Harald, 2012. "Carbon taxation and market structure: A CGE analysis for Russia," Energy Policy, Elsevier, vol. 51(C), pages 696-707.
    18. Oral, Isil & Santos, Indhira & Zhang, Fan, 2012. "Climate change policies and employment in Eastern Europe and Central Asia," Policy Research Working Paper Series 6294, The World Bank.
    19. Wu, Xianhua & Deng, Huai & Li, Hua & Guo, Yiming, 2021. "Impact of Energy Structure Adjustment and Environmental Regulation on Air Pollution in China: Simulation and Measurement Research by the Dynamic General Equilibrium Model," Technological Forecasting and Social Change, Elsevier, vol. 172(C).
    20. Yang, Mian & Fan, Ying & Yang, Fuxia & Hu, Hui, 2014. "Regional disparities in carbon dioxide reduction from China's uniform carbon tax: A perspective on interfactor/interfuel substitution," Energy, Elsevier, vol. 74(C), pages 131-139.
    21. Pinglin He & Jing Ning & Zhongfu Yu & Hao Xiong & Huayu Shen & Hui Jin, 2019. "Can Environmental Tax Policy Really Help to Reduce Pollutant Emissions? An Empirical Study of a Panel ARDL Model Based on OECD Countries and China," Sustainability, MDPI, vol. 11(16), pages 1-32, August.
    22. Xavier Labandeira & José M. Labeaga & Xiral López-Otero, 2019. "New Green Tax Reforms: Ex-Ante Assessments for Spain," Sustainability, MDPI, vol. 11(20), pages 1-25, October.
    23. Webster, Allan & Ayatakshi, Sukanya, 2013. "The effect of fossil energy and other environmental taxes on profit incentives for change in an open economy: Evidence from the UK," Energy Policy, Elsevier, vol. 61(C), pages 1422-1431.
    24. Justin Caron & Stuart M. Cohen & Maxwell Brown & John M. Reilly, 2018. "Exploring The Impacts Of A National U.S. Co2 Tax And Revenue Recycling Options With A Coupled Electricity-Economy Model," Climate Change Economics (CCE), World Scientific Publishing Co. Pte. Ltd., vol. 9(01), pages 1-40, February.
    25. Haisheng Hu & Wanhao Dong, 2022. "The Goal of Carbon Peaking, Carbon Emissions, and the Economic Effects of China’s Energy Planning Policy: Analysis Using a CGE Model," IJERPH, MDPI, vol. 20(1), pages 1-20, December.

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