Energy Taxation: Reasons for Discriminating in Favor of the Production Sector

Posted: 23 May 2001

See all articles by Wolfram F. Richter

Wolfram F. Richter

TU Dortmund University; CESifo (Center for Economic Studies and Ifo Institute); Institute for the Study of Labor (IZA)

Kerstin Schneider

University of Dortmund; CESifo (Center for Economic Studies and Ifo Institute)

Abstract

If a small open economy wishes to restrict it's greenhouse gas emissions, it has to decide whether to impose uniform taxes on all polluters or to resort to a discriminatory policy. In practice, countries tend to impose higher taxes on households and to tax the industrial sector more leniently. This paper identifies conditions under which this is efficient. It is shown that an efficiency maximizing tax planner discriminates in favor of the production sector if (i) there are restrictions on the taxation of lump-sum income or if (ii) labor supply exerts market power.

Keywords: environmental taxes, taxing production vs. taxing consumption, monopolistic labor supply, lump-sum income, ecological dumping, environmental tax reform

JEL Classification: H21, Q48, J51

Suggested Citation

Richter, Wolfram F. and Schneider, Kerstin, Energy Taxation: Reasons for Discriminating in Favor of the Production Sector. Available at SSRN: https://ssrn.com/abstract=269308

Wolfram F. Richter (Contact Author)

TU Dortmund University ( email )

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D-44221 Dortmund
Germany
+49-231-755-3146 (Phone)
+49-231-755-5404 (Fax)

CESifo (Center for Economic Studies and Ifo Institute)

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Munich, DE-81679
Germany

HOME PAGE: http://www.CESifo.de

Institute for the Study of Labor (IZA)

P.O. Box 7240
Bonn, D-53072
Germany

Kerstin Schneider

University of Dortmund ( email )

D-44221 Dortmund
Germany

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

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