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Environmental tax and regional government consumption expenditure in a fiscal federalism system

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  • Maurizio Ciaschini
  • Rosita Pretaroli
  • Francesca Severini
  • Claudio Socci

Abstract

The increasing attention to climate changes have led national Governments to design environmental tax policies able to face environmental problems and their associated economic consequences like as a negative change of GDP. The environmental taxation in particular is considered a powerful instrument of pollution control. More important, it provides public revenue that can be recycled at local level in order to attain the regional double dividend in a fiscal federalism framework. In this respect, we use a Computable General Equilibrium (CGE) model with imperfect labour market, to assess the regional effects of an environmental fiscal reform designed with the aim of reducing the CO2 emissions in a fiscal federalism setting. In particular, we introduce a local green tax on commodities output with a progressive structure. The tax burden depends on the commodity polluting power. According to fiscal federalism principles the tax revenue is collected by the local Government and it is entirely recycled to finance the local consumption expenditure. The application is done on a bi-regional Social Accounting Matrix for Italy and the results highlights the distributional effects of the reform on macroeconomic variables into the bi-regional income circular flow.

Suggested Citation

  • Maurizio Ciaschini & Rosita Pretaroli & Francesca Severini & Claudio Socci, 2013. "Environmental tax and regional government consumption expenditure in a fiscal federalism system," ECONOMICS AND POLICY OF ENERGY AND THE ENVIRONMENT, FrancoAngeli Editore, vol. 2013(2), pages 129-152.
    • Handle: RePEc:fan:efeefe:v:html10.3280/efe2013-002008
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    1. Claudio Socci & Maurizio Ciaschini & Rosita Pretaroli & Francesca Severini, 2015. "Assessing US Policies for Health Care through the Dynamic CGE Approach," Bulletin of Political Economy, Bulletin of Political Economy, vol. 9(2), pages 93-126, December.
    2. Claudio Socci & Francesco Felici & Rosita Pretaroli & Francesca Severini & Renato Loiero, 2021. "The Multisector Applied Computable General Equilibrium Model for Italian Economy (MACGEM-IT)," Italian Economic Journal: A Continuation of Rivista Italiana degli Economisti and Giornale degli Economisti, Springer;Società Italiana degli Economisti (Italian Economic Association), vol. 7(1), pages 109-127, March.
    3. Deriu, S. & Cassar, I.P. & Pretaroli, R. & Socci, C., 2022. "The economic impact of Covid-19 pandemic in Sardinia," Research in Transportation Economics, Elsevier, vol. 93(C).
    4. Maurizio Ciaschini & Rosita Pretaroli & Francesca Severini & Claudio Socci, 2014. "Health Care Services and economic impact: a dynamic CGE approach," Working Papers 74-2014, Macerata University, Department of Finance and Economic Sciences, revised Dec 2015.

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    More about this item

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • D57 - Microeconomics - - General Equilibrium and Disequilibrium - - - Input-Output Tables and Analysis

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