Emission Tax Policy Research Articles

Welfare‐Reducing Integration Under Emission Taxes and Endogenous Competition Mode

ABSTRACTThis study examines asymmetric supply chain competition between integrated and non‐integrated supply chains under emission taxes when firms choose competition mode in the final goods market endogenously. We find that higher emission taxes may lead the non‐integrated downstream firm to adopt aggressive pricing to induce its upstream firm to lower prices, leveling competition with an integrated one. When the non‐integrated chain integrates, however, quantity contracts become dominant strategies, which might distort welfare under lower emission taxes if both environmental damage and product substitutability are sufficiently high. Our finding indicates the welfare‐reducing effects of government interventions post‐integration when emission tax policy and endogenous competition mode are relevant.

Cross‐Ownership, Green Managerial Delegation, and Emission Taxation

ABSTRACTThis paper analyzes the effects of cross‐ownership on green managerial delegation contracts in a Cournot duopoly market with emission tax policy. We show that higher cross‐ownership will always exacerbate environmental degradation and diminish societal welfare, even with green managerial delegation. Compared with sales delegation, green managerial delegation under such ownership always yields higher environmental damage and lower social welfare. Compared to concurrent regulation, noncommitted emission taxation always leads to lower environmental damage and higher social welfare, although green managerial delegation will not be chosen in the latter. Our findings have important policy implications.

Peran Wajib Pajak Kendaraan Bermotor Atas Kebijakan Pemutihan Pajak dan Pajak Emisi Karbon di Kabupaten Karawang

Tax whitening policies and motor vehicle carbon emission policies are one of the things that need to be considered, where the tax whitening policy must be seen as to the effectiveness of the policy and the carbon emission tax must be structured so that it can be accepted by the public. This research was conducted with the aim of knowing, analyzing and explaining the tax whitening policy and vehicle carbon emissions tax policy in Karawang Regency. This research uses a qualitative research approach with descriptive analysis methods. Research data was taken through field observations, interviews and literature studies. Based on the results and discussion, it was found that the effectiveness of the Vehicle Tax Reduction Program in Karawang, which is carried out regularly every year and socialization is carried out through various media, has succeeded in creating enthusiasm and community participation. This positive response can be seen from the increase in tax revenue and active taxpayer participation during the tax whitening period. If the vehicle carbon emissions tax policy is implemented in Karawang Regency, it has the potential to reduce pollution levels by 10%. However, taxpayers have had little response to this policy because it will increase the amount of responsibility for paying vehicle tax. The conclusion confirms that the tax whitening program is effective in achieving tax revenue objectives and stimulating community participation. The carbon emissions tax policy still needs to be thoroughly disseminated to the public so that the main objectives of the policy are conveyed well.

Impact of warranty and green level of the product with nonlinear demand via optimal control theory and Artificial Hummingbird Algorithm

Due to the current environmental situation and human health, a green manufacturing system is very essential in the manufacturing world. Several researchers have developed various types of green manufacturing models by considering green products, green investments, carbon emission taxes, etc. Motivated by this topic, a green production model is formulated by considering selling price, time, warranty period and green level dependent demand with a carbon emission tax policy. Also, the production rate of the system is an unknown function of time. Per unit production cost of the products is taken as increasing function of production rate and green level of the products. In our proposed model, carbon emission rate is taken as linear function of time. Then, an optimization problem of the production model is constructed. To validate of our proposed model, a numerical example is considered and solved it by AHA. Further, other five metaheuristics algorithms (AEFA, FA, GWOA, WOA and EOA) are taken to compare the results obtained from AHA. Also, concavity of the average profit function and convergence graph of different metaheuristics algorithms are presented. Finally, a sensitivity analysis is carried out to investigate the impact of different system parameters on our optimal policy and reach a fruitful conclusion from this study.

Economic-environmental assessment of emission tax policy in developing countries: evidence from Iran

PurposeThe present study aims at quantifying the likely impacts of an environmental tax on macroeconomic variables and pollution in Iran.Design/methodology/approachThe computable general equilibrium model, which allows the prediction of the economy-wide effects of any change in policy instruments, is applied.FindingsThe main findings reveal that gross domestic product, private consumption and income in both urban and rural areas will follow a declining trend as a result of environmental tax imposition. In a scenario with the highest level of tax, the predicted percentage change to the gross domestic product and private consumption is estimated at −21.32 and −40.96, respectively. In the same scenario, pollution emissions would decrease by 12.4–22.6% for CO2, CH4 and N2O.Originality/valueThis study uses a general equilibrium model to examine the effects of the carbon tax on environmental issues and household welfare, considering the unique conditions and regulations of Iran. While the related literature examines the CO2 tax, the current study covers more pollutants, including CO2, CH4, N2O, CO, SO2 and NOx. In addition, a distinguishing feature of the current study is that it applies a modified version of the social accounting matrix (SAM) database, which includes the heavy subsidies of energy products. Another significant feature of the current study is that it examines tax policy while tax rates are exerted endogenously (compared to previous studies).

Optimal Green Technology Choice for Firms under an Emission Trading Scheme: End-of-Pipe vs. Cleaner Production

Green technology innovation helps to improve both economic and environmental performance simultaneously. How to invest in green technology innovation under emission trading policy is a current issue worthy of attention. However, existing research has not delved into the choices of different green technology innovation models, namely cleaner production technology and end-of-pipe technology, available to firms and governments under the joint implementation of other policies. Thus, this paper studies the optimal model of green technology innovation under emission trading policy and emission tax policy by constructing a two-stage game model suitable for complex decision analysis. The results show that regardless of the value of emission trading price, the optimal green technology innovation choice of the firms is cleaner production technology. Furthermore, the results show that neither conflict nor consistency always exists between governments’ and firms’ choices. When the emission trading price is high, the choice of governments and firms is in conflict; when the emission trading price is low, the choice of the two is consistent, both prefer cleaner production. This study not only enriches the existing research in theory but also provides support for governments to guide the choice of firms and achieve a win–win situation in practice.

Subsidy strategy design for shore power utilization and promotion

ABSTRACT Shore power is an important green technology used by ports to reduce carbon emissions. This paper investigates how to design subsidy strategy for promoting the installation and utilization of shore power. However, while installation subsidies may promote the installation of SPI in ports, resulting in a reduction in ship emissions, utilization subsidies may attract more ship visits, which may increase the total emissions of a port. Therefore, subsidies for shore power utilization and installation should be optimized to minimize the cost to government (comprising the environmental costs of ship emissions, the cost of utilization or installation subsidies, and carbon taxes) and maximize the profit for ports (including profit from original and new ships, utilization and installation subsidies, and carbon taxes). Using the Stackelberg game methodology, we discuss five cases to give a comprehensive analysis of the design of different subsidy policies, including no subsidy, SPI-utilization subsidy undertaken by port, SPI-utilization subsidy undertaken by port and government, carbon emission tax policy considering SPI-utilization subsidy, and SPI-utilization and SPI-installation subsidies undertaken by port and government. Managerial insights are generated according to the theoretical analysis and numerical experiments results, which can give references to the government and port operators.

The spatial spillover effect of higher SO2 emission tax rates on PM2.5 concentration in China

In this paper, the adoption of SO2 emission tax rates higher than the legal minimum standard is regarded as a noteworthy policy reform in China (quasi-natural experiment), and a spatial Difference-in-Differences (Spatial-DID) model is constructed to test the direct effects (local effects) and indirect effects (spatial spillover effects) of SO2 emission tax policy reform on PM2.5 concentrations in the atmosphere of 285 China’s cities. The estimation and calculation results of the Spatial-DID model show that the SO2 emission tax policy reform can significantly reduce local PM2.5 concentration and significantly promote PM2.5 concentration in surrounding areas. The results of heterogeneity analysis show that the SO2 emission tax policy reform can produce a relatively more beneficial spatial spillover effect in eastern cities and higher administrative level cities, while the pollutants emission rights trading and the reform of NOx emission tax rates can produce beneficial spatial spillover effects when cooperating with the reform of SO2 emission tax rates. The results of the mediation effect analysis show that the higher SO2 emission tax rate can aggravate the surrounding PM2.5 pollution by promoting the aggregation level of industrial production factors and the industrial SO2 emission intensity in the surrounding areas, which can support the existence of the pollution heaven effect.

Emission taxation, green R&D, and managerial delegation contracts with environmental and sales incentives

AbstractWe extend the analysis of a managerial delegation model with green R&D by incorporating two explicit incentive‐based executive compensation contracts. In the combination of environmental and sales delegations, (i) the incentives are higher than those under a single incentive scheme, (ii) firms' output and abatement efforts are higher, and (iii) total emissions are lower, and (iv) a firm's profits are higher than that under a sales delegation. Therefore, an emission tax policy, along with firms' compensation packages related to environmental delegation, can play a key role in curving market failure and improving welfare.

Sustainability Economic Production Quantity with Warm-Up Function for a Defective Production System

Inventory management seeks to improve manufacturing by contracting inventory costs in a similar fashion to raise efficiency and profit. One approach is to develop inventory management models according to actual production systems. Furthermore, governmental policies in many countries impose many regulations on firms to fulfill the growing demand for a reduction in carbon emissions. Warm-up is a familiar concept in industrial applications. It allows the manufacturing system to work at a higher level of productivity and efficiency, as well as decreasing the number of defective items and maintenance costs. Along with fewer poor-quality items, the system has less waste as scrap items entering the environment and also requires less energy and workload to focus on reworking. The economic production quantity (EPQ) problems with a warm-up as an input parameter have been studied in a few works recently. This paper proposes a production-inventory model which considers the warm-up period as a decision variable and investigates its impact on the total cost. Furthermore, the defective rate is a decreasing linear function related to the warm-up period’s length. The production-inventory model takes into account the carbon emission tax policy. The main aim of this research is to jointly optimize both the length of the warm-up period and the production cycle in order to minimize the total cost of the production-inventory system and, therefore, reduce emitted carbon emissions. The comparison of tax prices and the effect of the proper warm-up period on the amount of carbon emissions are discussed in the sensitivity analysis.

Port Competition and Cooperation Under Emission and Privatization

The study considers the competition and cooperation between mixed duopoly ports with service differentiation when both emission tax and partial privatization policies are implemented together. By developing three-game models between government and port enterprises, this paper first studies and compares, under different game scenarios, the optimal emission tax for mixed duopoly ports and privatization level for a semipublic port, as well as the optimal output (or pricing) and emission reduction of semipublic and private ports. Moreover, the profit and utility of the two ports, environment damage, consumer surplus, and social welfare are also compared, and the impacts of technology spillover for emission reduction and service differentiation on the decision-making of the government and port enterprises are discussed. We find that the optimal emission tax under a strategic cooperation scenario can reach a higher level, then the government needs more efforts to protect the environment. In addition, although port cooperation is conducive to maximizing social welfare and increasing port throughput, it harms the profitability of the two ports.

“Green” innovation, privacy regulation and environmental policy

We present a Hotelling duopoly and study the relationship between privacy regulation and environmental policy in an industry in which firms invest in “green” innovation (E-R&D) to reduce emissions in production. This research concludes that governments need to set emission taxes consistent with privacy regulations. With strong privacy protections, emission taxes should be higher than the case with no privacy protections. In the asymmetric case with poor privacy regulation, the optimal emission tax is highest to achieve emissions reductions. In addition, an economic trade-off can arise from the industry profits and E-R&D investment. With weak privacy regulation, the effort of E-R&D is highest, and corporatedo the least harm to the environment, while the industrial profits are lowest due to the massive tax burden. Finally, we suggest that policymakers should (i) combine reasonable emission tax policies and green finance for renewable energy projects, (ii) conduct weak privacy regulations on green finance and renewable energy projects, and (iii) encourage uniform pricing for renewable energy products from a competition policy perspective.

Lobbying, Time Preferences and Emission Tax Policy

Lobbying, Time Preferences and Emission Tax Policy

EMISSIONS TAX AND EXECUTIVE COMPENSATION: A PUBLIC–PRIVATE JOINT MECHANISM TO PROMOTE ENVIRONMENTAL AND ENERGY MANAGEMENT

It is widely accepted that a market-based instrument such as a tax on greenhouse gas emissions is effective in motivating firms to improve energy efficiency, environmental management and invest in environmentally-related research and development (R&D). However, modern corporations tend to separate ownership and management, and decision-making executives who are myopic may not share the firm owners’ concern about their firm’s exposure to long-run costs and risks associated with climate change. Hence, executive wage contracts should include rewards for environmental performance, particularly in energy efficiency and developing R&D to reduce emissions. This paper examines the effect of implementing executive compensation that is partially indexed to abatement in a monopolist firm, in which decision-making is delegated to a manager under an emissions tax policy. In equilibrium, it is shown that the new wage compensation leads to more abatement, greater production of output, and higher wages for the manager compared with a conventional wage scheme where wages are solely indexed to profits. Hence, the government imposes a lower emissions tax on the firm. More importantly, this public–private joint mechanism results in net social welfare improvement in equilibrium. However, whether the monopolist’s profit is higher in the new wage scheme depends non-monotonically on the abatement efficiency technology and the extent of wage indexation to profitability.

Foreign Eco-Technology Licensing Strategy and the Coordination of Import Tariff and Emission Tax Policies

This study investigates eco-technology licensing strategy by a foreign firm that offers two-part tariff licensing contracts (i.e. combination of a per unit royalty and a lump-sum fee) to a domestic polluting firm under the strategic import tariff in the presence of an exogeneous emission tax. We particularly consider the possibility of negative royalty (or subsidised royalty per unit production) by the foreign licensor and compare the two different licensing cases with and without non-negative royalty. We find that given a lower level of emission tax, the licensor may choose negative royalty only when the import tariff is high. We also find that the optimal import tariff with non-restrictive licensing contract with a negative royalty is higher than that with restrictive one, but allowing a negative royalty is better for domestic welfare unless the emission tax is so high (or environmental damage is serious). Finally, we show find that the optimal import tariff under the two-part tariff licensing might have a negative relationship with an emissions tax.

Optimal Environmental Policy in a Dynamic Transboundary Pollution Game: Emission Standards, Taxes, and Permit Trading

Global environmental problems such as transboundary pollution and global warming have been recognized as major issues around the world. In practice, governments of all countries are actively exploring various environmental policies to control pollution. The government needs to consider the impact of neighboring regions when formulating environmental policies, especially in the context of transboundary pollution. However, the above problems are less studied, to bridge this gap and aim at solving problems in existing practices, we consider a differential game model of transboundary pollution control to examine which policy is more effective in promoting environmental quality and social welfare in a dynamic and accumulative global pollution context. Three alternative policy instruments, namely emission standards, emission taxes, and emission permit trading, are considered and compared. The results show that the social welfare of each region is the lowest and the total pollution stock is the highest under the emission tax policy due to the “rent-shifting,” “policy-leakage,” and “free-riding” effects. Moreover, the realized level of the environmental policy in the Nash equilibrium of the policy game is distorted away from the socially optimal level. The emission standards policy is found to be better than the emission tax policy and characterized by initiating the rent-shifting effect without the policy-leakage effect. Moreover, the pollution stock of two regions is found to be the lowest and the social welfare is found to be the highest under the emission permit trading policy, which is not associated with any of the three effects. Finally, a numerical example is used to illustrate the results, and a sensitivity analysis is performed in the steady state.

Impact of a methane emission tax on circular economy scenarios in small wastewater treatment plants.

This paper analyzes the impact of methane emissions taxation on the recovery of the investments required for implementing technologies that use biogas energy in small wastewater treatment plants (WWTPs) in Brazil. It is based on the hypothesis that the adoption of a national methane emission tax policy would encourage small WWTPs to become sustainable power plants. The procedure involved 173 anaerobic plants to analyze: (a) methane production; (b) available useful energy; (c) investments and avoided costs for implementing STHIL system (thermal drying sludge) and motor generator (electricity generation); (d) financial impact for two scenarios (C1: no emissions tax; C2: with tax). Positive environmental and financial results were observed for WWTPs, varying according to the period of time analyzed for both technologies. Investments must be made in cogeneration in anaerobic WWTPs for achieving satisfactory results. Taxation must not be viewed simply as a punitive instrument; on the contrary, it should be seen as a tool to encourage continuous process improvement. The circular economy may support the enlargement of the wastewater collection and treatment system, guaranteeing widespread sanitation conditions in urban areas. However, the actual implementation of a methane emission tax in Brazil still requires many rounds of discussion among sanitation companies, government, and civil society, to establish emission limits, and unit taxes, as well as to consolidate a carbon trade to follow through with this decision in the sanitation sector.

Transboundary watershed pollution control and product market competition with ecological compensation and emission tax: a dynamic analysis.

Product competition and pollution control are closely related to watershed environmental management, but existing literature rarely investigates them in an identical framework. Therefore, this paper develops a multiple differential game model to analyze product market competition and ecological compensation games between watershed regions based on the assumption that a region can choose four strategies to regulate its manufacturers while cooperating with other regions in the basin. Then, we solve the model and obtain a simultaneous equilibrium between the governments and manufacturers for the first time. The results show that the combination of emissions tax and ecological compensation results in the highest social welfare and water ecology for all regions in a basin. Furthermore, the ecological compensation rate independent of emissions tax policy and ecological compensation does not shift investment from downstream to upstream, but it can induce the upstream region to increase investment in management. In addition, if the governments impose an emissions tax, manufacturers' output in both regions decreases, and the upstream region is higher than in the downstream region.

Investigating Australian households’ vehicle ownership and its relationship with emission tax policy options

There is an equity question around the distributional impact of an emission tax policy in Australia. For households that cannot afford to live in the inner city, their housing options are limited to suburban areas where public transport may not be available. Travelling with their vehicles is crucial for commuting, shopping and other daily activities for these households and being taxed on their emissions means they are more financially vulnerable than households with access to good public transport. In addition, certain household such as those with children may need larger vehicles, and hence may also face a higher emission tax. This study aims to analyse the equity of emission tax policies by looking at its possible impact on different households. This study uses a combined spatial microsimulation and imputation approach to distribute various vehicles to different households and analyse their usage. The results show the dilemma in implementing an emission reduction scheme. Taxing the use of vehicles may impact lower income households the most as they will lose a higher proportion of their income. This is intensified by targeting the more inefficient vehicles, especially older vehicles. Results suggest incentives or concessions could be used to reduce this impact.

Investment in environmental innovation with environmental regulation and consumers’ environmental awareness: A dynamic analysis

This paper investigates the effects of environmental regulation and consumers’ environmental awareness on the optimal investment strategies of a monopolist’s environmental innovation. We develop a dynamic optimal control model in which two kinds of environmental innovation are considered (i.e., end-of-pipe and cleaner production technologies innovation), and the installed abatement capacity and green performance of the product are state variables. We explore the monopolist’s optimal investment strategies and find that there exists a complementarity or substitutability relationship between the monopolist’s steady-state investments in end-of-pipe and cleaner production technologies innovation, which depends on the value of consumers’ environmental awareness. Further, we consider the optimal investment strategies from the perspective of social planner. By comparing investment strategies under the monopolist and social planner optimum cases, we show that the monopolist can achieve socially optimal innovation investment levels under a given environmental policy. Finally, we relax the assumption of a given policy and characterize the first-best and second-best policies, respectively, then compare R&D incentives of the two policies by numerical examples. We find that the first-best policy generates higher end-of-pipe and cleaner production technologies innovation incentives than the second-best emission tax policy.