The Economic and Environmental Effects of Taxing Air Pollutants and CO2: Lessons from a Study of the Czech Republic

Olga Kiula, Anil Markandya, Milan Ščasný () and Fusako Menkyna Tsuchimoto
Authors registered in the RePEc Author Service: Olga Kiuila

MPRA Paper from University Library of Munich, Germany

Abstract: This paper analyzes the impacts of local emissions charges as well as a tax on CO2 for a small open economy. We do this to see the separate and collective impacts of these taxes so as to understand the effects of a system of environmental taxes that reflects something close to the full internalization of external effects in the case of air emissions. The analysis was carried out using a static CGE model, with unemployment, bottom-up abatement technologies and with sector- and fuel-specific emission coefficients. The model imposes environmental charges on several pollutants, as a result of which emissions can fall through three channels: reduced output of the polluting good, substitution between production factors, and increased end-of-pipe abatement activity. Such CGE modeling of both local and global pollutants, with a wide range of abatement options is one of the first of its kind. The analysis shows that a full internalization of air pollution externalities can result in modest overall welfare gains and the combination of local pollution taxes and CO2 taxes should be feasible. There are, however, differences in terms of employment and output impacts, depending on what combination of taxes are applied, which sectors are covered and how fiscal revenues are redistributed.

Keywords: CGE modelling; Internalisation of external costs; Ancillary benefits; Carbon taxation; Air pollution charging (search for similar items in EconPapers)
JEL-codes: D58 D62 H22 H23 Q52 (search for similar items in EconPapers)
Date: 2014-09-21, Revised 2015-10
New Economics Papers: this item is included in nep-cmp, nep-ene, nep-env and nep-pbe
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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