Emission Tax 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.

Comparative Anslysis of Carbon Emission Reduction Policies in China’s Manufacturing and Transportation Sectors

This study evaluates China’s environmental policies, specifically the increase of carbon emission tax rates and the reduction of carbon emission intensity, by developing a New Keynesian Dynamic Stochastic General Equilibrium (NK-DSGE) model that incorporates energy consumption and carbon emissions. The production sector is segmented into manufacturing, non-manufacturing, and transportation, with transportation services acting as inputs for both manufacturing and non-manufacturing firms. We construct four cases within two scenarios, each characterized by distinct targets and policies. After calibrating and estimating the relevant parameters, we compare carbon reduction outcomes and economic fluctuations across the two scenarios. Our findings indicate that when targeting the same carbon emission tax rate increase or carbon emission intensity ratio reduction, policies that increase the carbon emission tax rate or reduce carbon emission intensity implemented in the manufacturing sector achieve greater carbon emission reductions compared to the same polices implemented in the transportation sector. Meanwhile, compared to the latter case, output experienced a greater decline, and inflation exhibited a more substantial increase in the former case. However, when the quantities of carbon emission reductions are approximately the same in the first quarter, policies that increase the carbon emission tax rate or reduce carbon emission intensity enacted in the transportation sector demonstrate superior performance relative to the same polices implemented in the manufacturing sector. This leads to smaller final output reductions and milder inflation increases. In summary, for equivalent levels of carbon emission reductions, policies implemented in the transportation sector yield more favorable economic outcomes than those applied in the manufacturing sector.

Public sector corruption, FDI and sustainable development in Africa: Does the pollution halo or haven hypothesis hold in Ghana?

This paper examines the effects of corruption and FDI on sustainable development in Africa, particularly Ghana. The study observes the behaviour of firms using foreign direct investment to track MNEs' role in carbon emission. The study employs a quantitative approach with an ex-post facto research design type to inquiry using data from the World Bank, the Global Footprint Network and Transparency International from 1980 to 2023. The symmetric result discloses that corruption and FDI depress sustainability significantly in the long run. In the short run, it turns out that corruption and FDI stimulate sustainability. However, the short-run asymmetric effect shows that the positive and negative shocks of corruption and FDI exude negative effects on sustainability. This provides strong and consistent evidence of the pollution haven hypothesis of FDI in Ghana. Therefore, firms under the one-district, one-factory (1D1F) flagship policy and beyond must be encouraged to adhere to the strict carbon policy of the host country. The decision of the government to introduce an emission tax in the 2024 budget is tenable but the tax must be properly targeted to achieve the desired outcome.

Synthetic natural gas (SNG) production by biomass gasification with CO2 capture: Techno-economic and life cycle analysis (LCA)

The integration of renewables with CCUS technologies has the promising potential to deliver energy applications with overall negative CO2 emissions which would significantly contribute to the climate neutrality. Moreover, the renewable-based synthetic fuels are predicted to replace the conventional fossil fuels. The current work evaluates key techno-economic and environmental indicators for the SNG production from various renewable fuels (e.g., sawdust, residual wood, organic wastes, agricultural and urban wastes etc.) through gasification process fitted with decarbonization capability. The investigated plant capacity was set to 500 MWth SNG with 60 % CO2 capture rate of primary fuel (biomass). The overall concept was evaluated using various process engineering approaches e.g., reactor & process modelling and simulation, model validation, heat and power analysis, techno-economic assessment combined with detailed environmental impact by Life Cycle Analysis (LCA). The investigated design shows promising performance indicators such as high cumulative energy efficiency (69 %) and carbon conversion to SNG, almost zero plant specific CO2 emissions (3 kg/MWh) and overall negative carbon emissions (−457 kg/MWh) from the whole biomass chain. The SNG production cost is not yet fully competitive versus the EU natural gas prices (53 vs. 30–35 €/MWh) but it shows promising potential considering the trends of increasing fossil prices and CO2 emission tax.

Brand extension strategy in the presence of carbon tax regulation policy and social influence

Brand extension is a common marketing strategy used to capture a competitive advantage in the fashion industry and often causes social influence between the parent and sub-brands. On the one hand, sub-brand consumers are more willing to buy products when the parent brand sells well. On the other hand, the parent brand consumers’ purchase intention decreases when the sub-brand product sells too much. The fashion industry also contributes considerably to global carbon emissions. To reach sustainable development goals, governments impose carbon taxes. This paper analyzes how social influence and carbon tax regulations can affect a monopolistic firm’s brand extension strategy. The analytical results show that the firm extends from the parent brand to the sub-brand when the magnitude of social influence is not strong in the absence of a carbon tax, as the market expansion effect dominates the cannibalization effect. When the regulator imposes a carbon emissions tax, the range is further narrowed of the social influence that allows the firm to benefit from brand extension strategy because of the cost effect. Counterintuitively, the brand extension strategy can force the regulator to lower the tax price. Moreover, our findings reveal that social influence exerts an inverse impact on the regulator’s tax pricing decisions, contingent upon the extent of the parent brand’s brand power advantage. Carbon tax regulation hurts the firm and consumer surplus, but benefits the environment and social welfare. Additionally, we reaffirm the robustness of our findings under conditions of asymmetry in the intensity of social influence and different pollution damage functions. Intriguingly, we find that the firm can mitigate the negative cannibalization effect by selling its sub-brand products through a downstream retailer.

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.

Towards net zero: Comprehensive approach for voluntary carbon trading among microgrids

In the context of growing focus over climate changes and promoting sustainability across a various range of fields, microgrids can play a significant role in global decarbonization endeavors, contributing to carbon neutrality and ultimately attaining net-zero emissions in the energy sector. The objective of this paper is to address the integration of voluntary carbon trading within microgrid communities, in the perspective to mitigate greenhouse gas (GHG) emissions and boost the integration of renewable energy sources (RES). Introducing five modular algorithms managing key aspects of carbon trading, the study engineers a comprehensive framework aiming to optimally orchestrate the Voluntary Carbon Market (VCM) within microgrids. Particularly, the developed algorithms address aspects such as market enrollment decision, optimal energy dispatch, managing the market transactions, sellers-buyers matching as well as the dynamic adjustment of carbon credit prices and emission taxes. The framework has been rigorously tested across three distinct scenarios. Results show that the developed VCM, with adequate configurations, has the potential to incentivize microgrids to curtail their GHG emissions, encourage the integration of more RES into their generation mix, and rewards the more proactive microgrids with substantial financial incentives.

The effect of hydrocarbon prices and CO2 emission taxes on drainage strategies

Secondary recovery methods, such as water and gas injection, are effective and cost-efficient techniques for enhancing hydrocarbon recovery; however, they are highly energy-intensive, leading to a large environmental footprint. This study provides insights into the challenge of balancing high hydrocarbon demand with the imperative to reduce CO2 emissions from production by estimating how drainage strategies change under varying economic parameters and CO2 tax levels. An operator’s choice of drainage strategy is assumed to be the drainage strategy yielding the highest net present value (NPV). This paper simulates the drainage strategy of an under-saturated oil reservoir, utilizing reservoir simulations and incorporating a mathematical model that represents the production processing plant. This yields hydrocarbon production, the energy required, and the resulting CO2 emissions, all incorporated into an NPV based on hydrocarbon prices and CO2 emission taxes. The drainage strategy is then optimized to maximize NPV for various hydrocarbon prices and several levels of CO2 tax on associated emissions. The findings of this study indicate that increasing gas prices favor reducing reservoir pressure below the bubble point pressure, thereby releasing solution gas and leaving oil in the reservoir. Although lower reservoir pressure reduces the energy required for injection, the resulting increase in gas production necessitates more energy for gas compression, ultimately leading to higher emissions when gas prices rise relative to oil prices. Additionally, this study reveals that for facilities well designed for the present injection and production volumes (greenfield scenarios), the impact of CO2 tax is limited, leading to a single optimal drainage strategy. In contrast, less energy-efficient facilities (brownfield scenarios) exhibit a more pronounced need to optimize drainage strategies in response to variation in CO2 tax, and oil and gas prices. This study indicates that for fields with efficient production facilities, the ratio of gas to oil prices is more important for the drainage strategy than CO2 tax levels, as income from production tends to dominate emission taxes. This implies that hydrocarbon prices are more important for CO2 intensity than CO2 taxes, e.g., a gas price increase relative to oil price promotes higher CO2 intensity due to a shift towards more energy-intensive gas production whereas realistic tax levels for CO2 emissions have only a minor impact. Thus, increasing CO2 tax levels is mainly a measure impacting emissions from fields with inefficient production facilities.

A sustainable inventory model for a two-echelon cold chain with green technology investments and stock-dependent demand under carbon emissions tax regulation

Cold chains are specialised supply chains that make use of refrigerated storage facilities and distribution nodes. Products that have to be stored and distributed via cold chains are temperature-sensitive items such as perishable food or vaccines. If these products are not maintained at the correct temperatures, their safety and quality may be comprised with dire consequences for end-users. Operating refrigerated storage units consumes a lot of energy and the majority of transportation trucks used for distribution are powered by fossil fuels and therefore, cold chains are a major source of carbon emissions. With this in mind, this paper proposes a sustainable inventory model for a two-echelon cold chain with stock-dependent demand and green technology investments under a carbon emissions tax regulation. The carbon tax is imposed by policy makers to encourage the cold chain to reduce its emissions whereas, the green technology investment is a voluntary measure taken by the cold chain to reduce its carbon emissions. Based on the results, a carbon tax regulation is about 3% more effective than a green technology investment in terms of profit maximisation potential. Moreover, when it comes to investing in green technologies, there is an optimal investment amount above which increasing the investment results in decreased profits and increased emissions. Other avenues that the cold chain can explore in effort to improve profitability include increasing the potential market size, displaying higher volumes of stocks, using larger capacity transportation trucks and filling the trucks to capacity.

Integrated modelling of fertilizer and climate change scenario impacts on agricultural production and nitrogen losses in Austria

The European Commission's Farm to Fork strategy aims at reducing nutrient losses and fertilizer use, but has been criticized for its expected negative impacts on European economy, agriculture, and food supply. We apply an integrated modelling framework to analyze potential effects of fertilizer reductions on land use, nitrogen losses, and agricultural output of two fertilizer and four climate change scenarios. The fertilizer scenarios comprise a uniform 20 % reduction of mineral N fertilizer (f20) and a combination of several fertilizer restrictions (fcm). The model results indicate that the restrictions in fertilization lead to decreases in crop production of 6 to 9 %, whereas intensive and extensive grassland production increases. N losses to air, water, and soil are substantially reduced by 9 % (f20) and 20 % (fcm), yet fall short of the intended 50 % reduction. The regional heterogeneity of the model results shows that tailored measures need to be elaborated by taking climate change developments, the regional heterogeneity of prevalent farming systems, and bio-physical conditions into account. Uniform measures applied to the national policy context fall short to attain policy targets cost-effectively. N emission capping, taxes or managerial measures such as crop rotational N balancing are options to be explored in future research.

Analysis of reduction of carbon emission and dynamic service policies in a green manufacturing system under isoperimetric fixed servicing budget constraint

In the recent highly saturated, fluctuated as well as competitive marketing situation, economic growth, stability and survival of a manufacturing company are substantial factors for the competent authority of a manufacturing firm. Again, due to the harmful effects of different chemicals and preservative oriented products, consumers gradually show their sensible interest towards the green products and their benefits. Furthermore, emission reduction and carbon emission tax become major issues on the sustainable growth and reputation of a manufacturing company. Fundamentally, considering these factors, this study demonstrates the prior decisions regarding best-found policy of a manufacturing company considering the effects of service with sold eco-friendly (green) products under the effects of emission taxation and reduction policies. The demand effected by level of greenness, price and dynamic service provided to the consumers. Now, due to the budget constraint, manufacturer estimates a fixed budget due to service to the consumers along with the items sold. Again, based on the carbon emission reduction policy, two distinct cases are arisen which are analyzed separately. Due to the budget constraint, maximization problem associated to the model becomes an isoperimetric control problem. Then to illustrate the realistic feasibility the proposed model, a physical example is taken under consideration and it is solved using Teaching–learning-based optimization algorithm (TLBOA) considering each of the cases. Finally, the sensitivity analyses are performed to get some important implications for the manager of the proposed manufacturing system.

A Mathematical Framework Evaluation for Sustainable EOQ Considering Environmental Factors

One of the key concerns in production planning has always been determining the economic lot size. Researchers have been studying this issue for a while, and numerous models have been created to meet objectives with the least amount of expense. This study's objective is to assess a more sophisticated approach to deciding lot size by taking into account the costs associated with emissions taxes (environmental impact). It will be suggested to adopt a framework, called Sustainable Economic Order Quantity (SEOQ), for inventory control in the pump manufacturing industry. For the purpose of assisting decision-makers and policies on inventory issues, this study included a useful numerical analysis as well as a sensitivity analysis. Finally, the experimental findings demonstrated that the suggested models would solve the issues with the lowest possible overall inventory costs.

Measuring climate transition risk at the regional level with an application to community banks

We develop a measure of climate transition risk for regional economies in the U.S., based on the mix of firms that produce emissions in each region. To quantify transition risks, we consider the introduction of an emissions tax levied on companies emitting greenhouse gases and estimate changes in the market values of industries due to a carbon tax using Merton's (1974) model. We find that transition risks are highly concentrated in a few sectors and counties with heavy exposures to transition-sensitive sectors. The size and geographic concentration of the tax effects depend significantly on assumptions about the elasticity of demand for inputs in the production chain. When applying county-level estimates for transition risks to banks’ deposit footprint, we find mild to moderate transition risks for community banks as a whole, although transition risks are high for a few banks.

Evaluating Vietnam's container terminal efficiency considering carbon neutrality

This paper aims to assess container terminal (CT) efficiency with the effect of carbon neutrality. Among mechanisms to achieve carbon neutrality in CTs' operations, emission taxes are deemed the most preferred tool to internalize the external costs associated with greenhouse gas emissions by placing a financial burden on polluters. This paper first uses cluster analysis to determine the homogeneous decision-making units (DMUs), i.e., container terminals. A novel approach is proposed to determine the level of emission taxes that DMUs should be levied based on how much CO2 they discharge. Since emission taxes are an undesirable output from the operations of CT operators (CTOs), the Slacks-based Measure Data Envelopment Analysis (SBM-DEA) model is thus employed to incorporate the emission taxes into the research model and to determine the optimal emission taxes for CTOs. Finally, the CTOs in Vietnam (hereafter the VN-CTOs case) are empirically surveyed to verify the proposed model. The proposed research framework can contribute a methodological reference toward the relevant literature in achieving carbon neutrality. Further, the empirical results can provide practical information for the Vietnamese CTOs to improve their CT efficiency.

Economic framework for green shipping corridors: Evaluating cost-effective transition from fossil fuels towards hydrogen

Global warming's major cause is the emission of greenhouse-effect gases (GHG), especially carbon dioxide (CO2) whose main source is the combustion of fossil fuels. Fossil fuels serve as the primary energy source in many industries, including shipping, which is the focus of this study. One of the measures proposed to tackle GHG emissions is the development of green shipping corridors - carbon-free shipping routes that require the transition to alternative fuels, which are gaining competitiveness. One of the reasons for that is carbon pricing, which taxes CO2 emissions. However, the lack of consensus on the most cost-advantageous alternative fuel in the long run results in the delay of the implementation of green shipping corridors.To make it more accessible for stakeholders to conduct an economic analysis of the various options, a framework to determine and minimize the costs of transitioning from fossil fuels to any alternative fuel is proposed, over the period of one voyage, considering the lost opportunity cost, the deployment cost of bunkering vessels at the necessary call ports, the cost of converting the vessel, the car-bon emissions tax cost, and the fuel cost. This will allow stakeholders to choose the most economical alternative fuel, accelerating the development of green shipping corridor initiatives. To validate the effectiveness of the framework, it was applied in a case study involving a shipowner seeking to transition from heavy fuel oil (HFO) to Ammonia, Hydrogen, Liquefied Natural Gas (LNG), or Methanol. This study faced limitations due to the unknown costs of installing bunkering vessels for Ammonia and Hydrogen. However, it evaluates the cost-effectiveness of alternative fuels, providing insights into their short-term economic viability. The results showed that Hydrogen is the most cost-advantageous fuel until a deployment cost per bunkering vessel of 1,990,285$ for a sailing speed of 22 knots and 2,190,171$ for a sailing speed of 18 knots is reached, after which LNG becomes the most economical option regardless of variations in the carbon tax. Moreover, a sensitivity analysis was conducted to determine the effects of variations in parameters, such as carbon tax, fuel prices and vessel conversion costs in the total cost of each fuel option. Results highlighted that even though HFO remains the most economical fuel option, even when considering a high increase in carbon tax, the cost gap between HFO and alternative fuels narrows significantly with the increase in carbon tax. Furthermore, the sailing speed impacts the fuels’ competitiveness, as the cost difference between HFO and alternative fuels decreases at higher speeds.

Emission Taxes and Capital Investments: The Role of Tax Incidence

ABSTRACT This paper examines investment responses to emission taxes and the role of tax incidence in passing on tax burdens. Using private firms from Spain and the introduction of an emission tax in 2013 in the Autonomous Community Valenciana, we show that investments decline in response to the emission tax. Importantly, this investment decline does not depend on the level of pollution but on economic factors related to tax incidence. Investments in firms operating in highly competitive markets, firms with low pricing power, and firms with low financial flexibility are the most affected by environmental taxes. We generalize the investment findings using the introduction of carbon taxes in France and Ireland in a stacked difference-in-differences design. Overall, our results indicate that emission taxes affect not only polluters but also other firms and stakeholders such as suppliers, customers, and consumers depending on the relative elasticities of supply and demand. Data Availability: Data are available from the sources cited in the text. JEL Classifications: H22; H23; H32; G31.

Endogenous choice of corporate social responsibility and emissions tax: What impact do green consumers have on economic welfare?

Endogenous choice of corporate social responsibility and emissions tax: What impact do green consumers have on economic welfare?

Environmental sustainability under production competition with costly adjustments: An appraisal of firms’ behavior with regard to pollution dynamics

The waning efficiency of natural pollution sinks and the predicted consequence of their irreversible transformation into pollution sources within the current century call into question the environmental sustainability of economic activity and, more specifically, its basic engine: horizontal competition. Among factors likely to cast doubt on the environmental sustainability of competition, competing firms’ approaches to pollution control deserve particular attention because myopic approaches that ignore pollution dynamics accelerate such transformations. Another potentially harmful factor is the cost of adjusting production, which can hinder firms’ ability to reduce their polluting emissions in a timely way. In the context of a Cournot market structure, we consider competing firms that incur a cost when adjusting production and are subject to pollution emission taxes. We analyze how production adjustment costs and firms’ choice of myopic or farsighted pollution control policies affect their competitiveness and the long-run sustainability of the environmental system. We show that competition is not compatible with environmental sustainability under a myopic pollution control policy when the maximum threshold of pollution absorption has already been exceeded. Myopic policies cannot neutralize history dependency, and extremely large production adjustment costs exacerbate the problem. In contrast, farsighted pollution control policies can eliminate history-dependency as long as the tax policy is not too restrictive, though they lead to a more polluted environment than myopic policies operating below the maximum absorption efficiency threshold.

Emissions taxes under double-sided environmental externalities

It is well established that if a polluter exercises market power, the optimal emission tax should be set below the Pigouvian level, i.e., the marginal damage of pollution. In this paper, we show that relying on this intuition can be misleading if pollution is generated by both production and consumption. Specifically, we build a partial equilibrium model based on a monopoly power exerted over a final product, where the production and consumption of this product impose an environmental externality. We find that the first best can be attained by a combination of taxes on pollution from production and consumption, where the tax on the polluting monopoly is set precisely at the Pigouvian level, whereas the tax on (price-taking) consumers is set below the Pigouvian level.