Pollution Tax Research Articles

The Past Polluted: A Pigovian Approach to the Black Market in Antiquities

Abstract:In the global struggle to protect not-yet-excavated archaeological sites from looting, despite legal strictures, the playing field remains badly tilted against the site guards, customs officials, antiquities police, and prosecutors who lack the financial resources to enforce existing laws. To supplement and give teeth to the strict, but ineffectual, legal regime now in place, economic theory points to a policy solution: a “pollution tax” on antiquities purchased by residents of “market” countries, designed to internalize the social costs of looting so that the industry either takes measures to clean itself up or pays the government to prevent or mitigate the harm the industry causes. Tailored to fall more heavily on antiquities with weaker provenance or extremely high prices, and channeled into an antiquities-protection “superfund” (as was done to clean up toxic chemical sites) or via existing governmental agencies, a Pigovian tax on antiquities could provide a sustainable funding stream for more robust monitoring and enforcement efforts against the illicit market as well as for better site security. Archaeologists and dealers may find the idea of this kind of tax repugnant, but such feelings may be overcome through sustained discussion and negotiation explaining the benefits to both sides of a more licit regulated market.

The role of Chinese people’s political consultative conference in environmental governance

PurposeThis paper aims to examine the role of the Chinese People’s Political Consultative Conference (CPPCC), a political advisory body in China, in addressing environmental challenges.Design/methodology/approachThis study uses 457 CPPCC environmental proposals across 160 cities for the period of 2013 to 2015 and a mediation effect model to examine the effect of CPPCC environmental proposals on environmental quality.FindingsThis study shows that CPPCC environmental proposals improve environmental quality; and the relationship between CPPCC environmental proposals and environmental quality is partially mediated by enforcement of environmental laws and regulations only although the proposals positively influence both law enforcement and environmental public budget expenditures.Research limitations/implicationsFuture research may examine how the interaction between the government and other important stakeholders such as non-governmental organizations can help improve environmental quality. In addition, future research may examine whether other policy tools such as pollution tax and fees, environmental subsidies, and emissions trading can play a role in dealing with environmental issues.Practical implicationsThis study provides evidence that supports CPPCC members to take an even more active role in public governance by engaging with both the government and the public.Social implicationsThe CPPCC’s participation in public governance helps the government respond to critical issues more effectively. The government should pay close attention to CPPCC proposals when making public policies. Furthermore, the government probably needs to review its policies in relation to environmental expenditures.Originality/valueThis study is the first to examine the role of the CPPCC, a political advisory body, in addressing environmental challenges through functioning as a bridge between government and the public, whereas the extant literature has predominantly focused on the role of government, market and the public.

Evolutionary Game Analysis of Government Incentive Mechanism for Green Buildings

With the increasingly serious environmental pollution problem, the development of green building scale has become the fundamental way to transform urban development, and this development is the result of continuous game between government, public consumers and developers. In order to analyse the evolutionary equilibrium between the initial strategy and the incentive and constraint adjustment, this paper constructed a three-party evolutionary game model between government, developers and public consumers, and under different subsidy levels, inspection frequency and pollution tax, the government. The behavioural changes of developers and public consumers were simulated. The study found that government financial subsidies, irregular inspections and pollution taxes will have a positive effect on the scale of green buildings. Moderate financial subsidies, low frequency inspections and high pollution taxes have the most obvious effect on the development of green houses.

The impact of environmental protection tax on sectoral and spatial distribution of air pollution emissions in China

Environmental problems, associated with climate change and air pollution, have become increasingly serious for China in recent years, which have aroused great domestic and international concerns. To mitigate these problems with great efforts, the Chinese government has implemented the Environmental Protection Tax Law in the whole country since the beginning of 2018. Although the new tax law is perceived as an aggressive policy that tends to establish a taxation system for promoting air pollution control, evaluations of its effectiveness are insufficient and urgently needed for China. Using a multiregion multisector Computable General Equilibrium model, we, for the first time, quantify the impacts of this ‘pollution tax’ policy on modulating air pollutants emissions. Our analysis shows that current tax policy is generally able to reduce many short-lived air pollutants emissions (e.g. SO2, NOX, TSP, PM10, PM2.5, CO, VOCs, OC, NH3 and BC), but the significant effects only happen in regions with large economic scale (i.e. Guangdong, Shandong and Zhejiang provinces) and in sectors with high emission intensity (i.e. the electric power and nonmetal manufacturing sectors). However, at the national level, the overall effect of the current policy on air pollution mitigation is relatively small, less than 2% compared to a business-as-usual scenario. Large emission reduction potentials exist if the tax increases. Therefore, a more ambitious tax policy is urgently needed in order to achieve China’s air pollution mitigation target of 2020. We also find that in China for implementing any pollution tax policies, the rate of decline in CO2 emissions is much larger than those of short-lived pollutants, which indicates a huge co-benefit on global climate change mitigation.

Heterogeneous firms, exports and pigouvian pollution tax: Does the abatement technology matter?

Environmental regulations aim at influencing individual behaviour toward more efficient use of resources and adoption of greener technologies for a sustainable development of globalized economies. This work investigates how and to what extent firms are influenced by an environmental Pigouvian tax on their technology and trade decisions. By using an international trade model with monopolistic competition that accounts for the heterogeneity of firms in terms of productivity, it is theoretically examined the decision of introducing a green technology or keeping a pollutant less advanced technology. If all firms adopt a pollutant technology, the eco-tax lowers emissions through a selection mechanism because the least productive firms are forced to leave the market. By imposing higher compliance costs to active firms, export propensity is negatively influenced as well. When abatement technologies can be adopted, an additional source of pollution reduction is obtained. The environmental tax will positively affect eco-innovation propensity and, indirectly, export propensity. However, since the positive effect will strictly depend on the amount of firm productivity, environmental tax and costs of clean technology, the Pigouvian tax can foster eco-innovation across the largest and most productive firms only. Productivity enhancing policies tailored to firm characteristics, especially size, may be more successful in the diffusion of cleaner technologies across all firms.

Location decisions of industries in the presence of transportation costs and environmental regulations: empirical evidence from India

This paper examines how transport costs and pollution taxes both jointly determine the location of production in a spatial framework. In a two-region model, a firm produces a dirty good through a single production plant in one region and serves consumers in both regions. Production, which causes local pollution, is subject to some pollution tax. Furthermore, the firm has to incur transport costs in order to serve consumers in the other region. Using factory level data for the Indian manufacturing sector for the year 2011–2012, I find evidence that both these factors play a significant role in firm location decision. States with relatively stringent environmental regulations are less attractive for plant location. On the contrary, the impact of transport infrastructure is dependent on the level of soft means of communication. Effective means of communication networks reduce the need for transport infrastructure. Apparently, communication networks act as a substitute for effective transport infrastructure. However, this does not hold true for the sub-sample of highly polluting industries.

Redistribution and pollution taxes with non-linear Engel curves

This paper analyses optimal corrective taxation and optimal income redistribution. The Pigouvian pollution tax is higher if pollution damages disproportionally hurt the poor due to equity weighting of pollution damages. Moreover, under general utility functions, optimal pollution taxes should be set below the Pigouvian tax if the poor spend a disproportionate fraction of their income on polluting goods. However, if Engel curves are linear, optimal pollution taxes should follow the first-best rule for the Pigouvian corrective tax even if the government wants to redistribute income and the poor spend a disproportional part of their income on polluting goods. The often-used quasi-linear, CES and Stone-Geary utility functions all have linear Engel curves. If Engel curves are linear, and if pollution taxes are not optimised, Pareto-improving green tax reforms exist that move the pollution tax closer to the Pigouvian tax. Simulations demonstrate that optimal corrective taxes should be Pigouvian if the demand for polluting goods is derived from a LES demand system, but deviate from the Pigouvian taxes if demand for polluting goods demand is derived from a PIGLOG demand system.

Managing the trade-off between economic growth and protection of environmental quality: the case of taxing water pollution in the Olifants river basin of South Africa

Abstract A series of pollution control measures have been introduced to protect water quality in the Olifants river basin, the third most water-stressed and most polluted basin in South Africa. This paper employed an environmentally extended computable general equilibrium (CGE) model to analyse the economic and environmental implications of a tax on water pollution in the basin. Implications of increasing the pollution tax rate currently in place for the levels of economic activities and water quality have been simulated under alternative tax revenue recycling schemes. Results of our policy simulations suggest that internalising the cost of water pollution through the tax regime achieves its environmental goals of protecting the aquatic ecosystem, by shifting production away from pollution-intensive sectors. This, however, comes at some cost to the regional economy of the basin. Recycling the tax revenue through income transfers to households or a subsidy to pollution abatement mitigates the adverse economic impacts.

Environmental policy competition and heterogeneous capital endowments

In a model with monopolistic competition, international trade, and mobile capital, this paper aims to investigate the relationship between two countries with different capital endowments in terms of environmental regulations. The conventional result is that the capital-abundant country will charge a higher tax rate than the capital-scarce country. This present paper, however, finds that the opposite result may occur. Another feature of this paper is that governments strategically use the distribution of environmental rents as a tool to attract capital inflows. We show that in the absence of capital mobility, the two countries will distribute all of the pollution tax revenues to the general public. The presence of capital mobility induces the governments to allocate some or all of the environmental rents to the polluting firms to attract capital inflows. The capital-abundant country has a stronger incentive to allocate rents to the firms than the capital-scarce country. We also consider the case with global pollution, in which both countries tend to set less stringent regulations.

Refunding Emissions Taxes: The Case For A Three-Part Policy

Abstract This paper examines theoretically whether by combining both output-based refunding and abatement expenditure-based refunding, it is possible to limit the negative consequences that a pollution tax implies for a polluting industry. We show that this is indeed the case by using a three-part policy where emissions are subject to a fee and where output and abatement expenditures are subsidized. When the industry is homogenous, it is possible to replicate the standard emission tax outcome by inducing a polluting firm to choose the production and emission levels obtained under any emission tax, without departing from budget balance. By construction, any polluter earns strictly more than under the standard tax alone without rebate, making this proposal more acceptable to the industry. When firms are heterogeneous, the refunding policy needed to replicate the standard emission tax outcome is personalized in the sense that at least the output subsidy should be type dependent and it is strictly preferred only from the industry’s point of view to a standard environmental tax. We also explore the implications of uniform three-part refunding policies for a heterogeneous industry.

Competition under industry-stock-driven prevailing market price: Environmental consequences and the effect of uncertainty

We address competition between several firms that cause pollution when producing fully substitutable products. These firms comprise the industry and each individual firm charges for its products the market price determined by the difference between cumulative market supply and demand, i.e., by the industry's stock. We find that although the greater the number of firms competing for the same primary market, the lower the market price and the higher the industry inventory surplus, the reduction in price at market equilibrium is insufficient to stimulate greater aggregate sales. That is, greater competition does not necessarily induce higher industry output and pollution. Furthermore, we show that commitment production/pollution strategies compared to contingent strategies do not necessarily result in lower pollution, especially when the number of competing firms is not high, market uncertainty is low and proportional pollution taxation is high.

Climate Policies, Carbon Pricing, and Pollution Tax: Do Carbon Taxes Really Lead to a Reduction in Emissions?

Climate Policies, Carbon Pricing, and Pollution Tax: Do Carbon Taxes Really Lead to a Reduction in Emissions?

The effect of internationalisation and regulation on environmental efficiency: an empirical analysis of Spanish companies

The purpose of this paper is to estimate the impact of pollution taxes, the emissions trading system and internationalisation on environmental efficiency. To this end, we first estimate it for 100 industrial plants in Spain over a period of 11 years, 2001-2011, using a stochastic frontier analysis (SFA). The first two factors are included to test whether stronger environmental regulations improve efficiency, in line with the Porter hypothesis. The last is devoted to examine whether multinational companies are more efficient than local ones. Our empirical results reveal that pollution taxes do not produce the expected outcome for the entire sample, but in contrast, the emissions trading system has a significant and positive effect on efficiency. Finally, multinational companies are not more efficient, in contrast with previous studies.

MACROECONOMIC ANALYSIS OF THE EFFECTIVENESS OF TAX ECONOMIC REFORMS IN EU COUNTRIES

The article substantiates the necessity to introduce systematic and effective tax eco-reforms in the context of resource-oriented economic development by the European Union countries. The performance and effectiveness of the reforms are estimated in relation to the main four groups of environmental taxes: energy taxes, pollution taxes, resource taxes and transport taxes. The macroecological policy of the European Union countries is the object of the undertaken analysis. The article examines the impact of macroeconomic factors on environmental taxes across the EU, using a correlation analysis toolkit. Four groups of macroeconomic parameters were selected for analysis: internal macroeconomic factors (nominal GDP, real GDP, inflation, business cycle stage, budget deficit, energy consumption level); external macroeconomic factors (government debt, exports, foreign direct investments); institutional macroparameters (environmental culture, shadow economy, trust in government) and fiscal macroparameters (tax culture and fiscal freedom). The economic interpretation of the obtained correlates is given. Based on the correlation analysis, stimulators and de-stimulators of tax environmental reforms across the EU were identified. It is established that the factors that positively influence on the tax environmental reforms are the overwhelming majority of the analyzed factors. The formation of indicators of the effectiveness of tax environmental reforms is undertaken for six countries of the Community. In particular, the analysis covers three economic leaders (Germany, the United Kingdom and France) and three leading EU countries in the field of environmental tax collection (Latvia, Greece and Slovenia). The article presents approaches to improving the assessment of the effectiveness of tax environmental reforms based on the consideration of fiscal (budget-filling) and reproductive (multiplicative) functions of environmental taxes. In this regard, the environmental tax multiplier and accelerator, as well as the GDP elasticity coefficient for environmental taxes, were calculated for the analyzed group of countries. The criteria of economic efficiency of tax eco-reforms are proposed. Keywords: environmental taxes, macroeconomic effect, macro-environmental policy, multiplier, accelerator, elasticity

ENVIRONMENTAL TAXION TRENDS IN EUROPE

Introduction. EU countries are showing an increasing trend towards the priority of the public good “clean ecology”. Environmental taxation not only exerts fiscal, but above all, corrective influence on the behavior of economic agents. Nonetheless, the fiscal design of environmental taxes and their composition as a source of budget revenue remains an issue that needs further study. Purpose is to track current environmental tax trends in Europe, the evolution of environmental policy instruments in EU countries, to analyze their economic and social impact; to identify problems with the existing environmental taxation system in Ukraine. Methods. In researching current environmental tax trends in Europe, identifying the stages of evolution of environmental policy instruments, analyzing their impact on the economy and social sphere, substantiating the problems of the existing system of environmental taxation in Ukraine, a number of scientific and special methods of research were used, in particular: analysis, synthesis, induction, deduction, abstraction, generalization, statistical, graphic, tabular. Results. Based on the analysis of the dynamics of different types of environmental taxes in the EU-28 countries for the period 1995–2017 (gross, energy, transport, pollution taxes, resources), a general tendency for their increase was revealed. In a comparative analysis of growth dynamics of total environmental taxes (TET), taxes on CO2 and greenhouse gases in the same sample of countries during the study period, a tendency was found to exceed the growth rate of TET over the reducing harmful emissions, which confirms the implementation of environmental taxes fiscal function, than corrective one. It has been stated that, despite the coherence and systematic nature of European countries' environmental tax policy, compensating for “environmental losses” indirectly increases its sensitivity to public sector efficiency and breaks the link between environmental taxation and the public good “clean ecology”. At the same time, problems were identified in the field of environmental taxation in Ukraine, in particular to the lack of an effective model of taxation, due to the inconsistency of the revenue mechanisms and proportions of the distribution of environmental taxes between budgets of different levels. Conclusions. Further research suggests focusing on assessing efficiency level of the environmental tax system in European countries, which will create the basis for improving the latter in Ukraine.

Strategic Environmental Policy and the Mobility of Firms

The loss of international competitiveness of domestic industries remains a key obstacle to the implementation of effective carbon prices in a world without harmonized climate policies. We analyze countries’ non-cooperative choices of emissions taxes under imperfect competition and mobile polluting firms. In our general equilibrium setup with trade, wage effects prevent all firms from locating in the same country. While under local or no pollution countries achieve the first-best, under transboundary pollution taxes are inefficiently low and lower than under autarky where only the ‘standard’ free-riding incentive distorts emissions taxes. This effect is more pronounced when polluting firms are mobile.

Strategic Environmental Policy and the Mobility of Firms

The loss of international competitiveness of domestic industries remains a key obstacle to the implementation of effective carbon prices in a world without harmonized climate policies. We analyze countries' non-cooperative choices of emissions taxes under imperfect competition and mobile polluting firms. In our general equilibrium setup with trade, wage effects prevent all firms from locating in the same country. While under local or no pollution countries achieve the first-best, under transboundary pollution taxes are inefficiently low and lower than under autarky where only the standard free riding incentive distorts emissions taxes. This effect is more pronounced when polluting firms are mobile.

Oligopolistic Competition, Asymmetric Trade and Pollution Taxes

Oligopolistic Competition, Asymmetric Trade and Pollution Taxes

The impacts of firms’ mobility on the environmental policy

This paper investigates the impacts of firms’ mobility on the environmental policy. We focus on two issues. The first one is the relationship between the stringency of environmental regulation and the distribution of environmental rents; the second one is how the interjurisdictional competition shapes the selection of instruments. We find that, in the absence of firms’ mobility, an instrument that allocates more rents to firms will give rise to a lower pollution tax rate, but, in the presence of mobile firms, this result may be reversed. Another finding is that the interjurisdictional competition for mobile firms can lead the governments to adopt non-revenue-raising instruments. This provides an explanation for the prevalence of such instruments without relying on political reasoning. We also find that a larger number of jurisdictions may tighten the regulation, which differs from the conventional results.

The Case against Carbon Prices

Professor Dr. Anthony Patt is head of the Climate Policy Group in the Department of Environmental Systems Science at ETH Zurich, Switzerland. His research focus is on technological pathways and public policies for climate change mitigation and adaptation. He is a Coordinating Lead Author in Working Group III of the Intergovernmental Panel on Climate Change. He obtained his PhD at Harvard University's Kennedy School of Government. He is the author of “Transforming Energy: Solving Climate Change with Technology Policy” (Cambridge University Press, 2015). Download : Download high-res image (204KB) Download : Download full-size image Professor Dr. Johan Lilliestam is head of the Renewable Energy Policy Group in the Department of Environmental Systems Science at ETH Zurich, Switzerland. His research focus is policies and strategies for a transition to a completely renewable energy system, including the effects of interactions between different energy policies. He obtained his PhD at the Central European University in Budapest, Hungary. Before joining the ETH, he worked at the Potsdam Institute for Climate Impact Research (PIK) in Potsdam, Germany, and the International Institute for Applied Systems Analysis (IIASA) in Laxenburg, Austria. He currently holds a grant from the European Research Council for his work on policy interactions. Download : Download high-res image (202KB) Download : Download full-size image