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Taxing air pollutants and carbon individually or jointly: results from a CGE model enriched by an emission abatement sector

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  • Olga Kiuila
  • Anil Markandya
  • Milan Ščasný

Abstract

We analyse the separate and collective impacts of emissions taxation to understand the internalisation effects of externalities. The analysis is carried out using a static computable general equilibrium model, with unemployment, bottom-up abatement technologies represented by a step function, and detailed emission coefficients. Environmental and health external costs are quantified using the ExternE’s Impact Pathway Approach. Emissions, as a result of environmental taxation, fall through reduced output, production factor substitution, and increased end of pipe abatement activity. The analysis shows that a full internalisation of environmental externalities can result in modest overall economic and environmental welfare gains. There are, however, differences in terms of employment and output, depending on what combination of taxes are applied, which sectors are covered, and how fiscal revenues are redistributed. Air quality benefits range from €35–75 per ton of CO2 abated. Total environmental benefits always exceed GDP loss and the associated welfare loss.

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  • Olga Kiuila & Anil Markandya & Milan Ščasný, 2019. "Taxing air pollutants and carbon individually or jointly: results from a CGE model enriched by an emission abatement sector," Economic Systems Research, Taylor & Francis Journals, vol. 31(1), pages 21-43, January.
    • Handle: RePEc:taf:ecsysr:v:31:y:2019:i:1:p:21-43
    DOI: 10.1080/09535314.2018.1508000
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    Cited by:

    1. Ferran Sancho, 2021. "The mitigation potential of eco-taxation on carbon emissions: income effects under downward rigid wages," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 23(1), pages 93-107, January.

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    More about this item

    JEL classification:

    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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