Green Taxes and Administrative Costs: the Case of Carbon Taxation

66 Pages Posted: 20 Mar 2000 Last revised: 2 Dec 2013

See all articles by Sjak Smulders

Sjak Smulders

Tilburg University - Center and Faculty of Economics and Business Administration; University of Calgary - Department of Economics

Herman R.J. Vollebergh

PBL Netherlands Environmental Assessment Agency (Bilthoven); Tilburg Unversity ; CESifo Institute; Tilburg Sustainability Centre; Tilburg University - Center and Faculty of Economics and Business Administration

Date Written: August 1999

Abstract

This paper explores the trade-off between incentive effects and administrative costs associated with the implementation of various environmental tax instruments, with special reference to carbon taxes. In a simple model, we show under what conditions it is optimal to use input rather than emission taxes to internalize environmental externalities. Mixed tax regimes are also studied. If linkage of emissions to inputs is close, if abatement possibilities are costly, and if administrative costs of emission taxes are high, emission taxes should not be introduced. It is shown that these conditions directly apply to current tax policies toward CO2 emissions in several European countries that harness pre-existing energy taxes. First, there is a one-to-one correspondence between carbon content of energy and CO2 emissions. Second, only few possibilities exist to abate CO2 emissions separately. Third, energy excises allow to save on administrative costs. Broadening the carbon tax base by removing certain widely-used exemptions for energy production (and possibly adding emission taxes or abatement subsidies for selected industries) is likely to increase incentives for carbon reduction without significant additional administrative costs.

Suggested Citation

Smulders, Jacobus (Sjak) A. and Vollebergh, Herman R.J., Green Taxes and Administrative Costs: the Case of Carbon Taxation (August 1999). NBER Working Paper No. w7298. Available at SSRN: https://ssrn.com/abstract=198732

Jacobus (Sjak) A. Smulders (Contact Author)

Tilburg University - Center and Faculty of Economics and Business Administration ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands
+31 13 466 2920 (Phone)
+31 13 466 3042 (Fax)

HOME PAGE: http://www.uvt.nl/webwijs/english/show.html?anr=801585&lang=en

University of Calgary - Department of Economics ( email )

2500 University Drive, NW
Calgary, Alberta T2N 1N4
Canada

Herman R.J. Vollebergh

PBL Netherlands Environmental Assessment Agency (Bilthoven) ( email )

Bezuidenhoutseweg 30
Den Haag, 2594 AV
Netherlands
+31655736920 (Phone)

Tilburg Unversity ( email )

Tilburg
Netherlands

HOME PAGE: http://www.tilburguniversity.edu/webwijs/show/h.r.j.vollebergh.htm

CESifo Institute ( email )

Munich
Germany

Tilburg Sustainability Centre ( email )

P.O. Box 90153
Tilburg, North Brabant 5000 LE
Netherlands

Tilburg University - Center and Faculty of Economics and Business Administration ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

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