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Content archived on 2024-05-14

Green Taxes : Environment, Employment and Growth

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Computable General Equilibrium model, have been constructed for the three countries under examination: Sweden, Denmark and Italy. The specific feature as compared to other similar models is the integration of environmental taxes and associated, environmental improvements as measured in monetary terms. Besides, the models allows integrated evaluation of green taxes, they Wallow to evaluate the effect of a tax targeted to one source of emission on other emissions. Another unique aspect is the consideration of differences in enforcement costs between various taxes (under development for Denmark and Italy). Models are developed in GAMS.
Numbers in parentheses refer to the list in Section 1. 1.c). The dynamic analysis of economic implications of pollution abatement policies in Denmark and Italy was extended with respect to the numbers included pollutants (3, 5, 6). In addition to carbon, sulphur and nitrogen. 10 different pollutant and toxic substances were included. The results show that the macro economic impacts of policies reducing carbon emissions may not be so harmful provided appropriate structural adjustments take place. Substitution and complementarity over time between different sub sets of pollutants are also identified. In case of substitution, too narrowly focused abatement policies may generate increased emission of untaxed pollutants. The finding of complementarity between subsets of pollutants is consistent with results from similar studies in other- countries. This means a policy targeting any pollutant within a group would achieve abatement in most emission types included in the group. The purpose of the Swedish dynamic CGE study was to elucidate feedback effects of acidification on productivity and economic growth. Simulations are carried out for budget neutral SO taxes, where the taxes are used for reducing pay roll taxes. Environmental feedback of SO increased forest growth and health effects on labour productivity. Results show that, excluding endogenous environment feedback effects the cost of reducing SO, may vary between approximately 3 and 4 per cent welfare reduction depending on the assumed annual emission reduction rate. This cost is reduced by about 25 pei. cent when environmental feedback is included.
Numbers in parentheses refer to the list in Section 1. 1.c). Investigations of tax evasion and enforcement were carried out for Italy and Sweden. 15, 1 0). The partial equilibrium study of enforcement in Sweden, estimated enforcement costs as dependent on the monitoring intensity and political party power. (9). The results show a positive, significant, correlation between monitoring and costs. Further, two political parties, Conservatives and Environmental Party, show relatively high positive impacts on enforcement costs. Analytical results from tax switch under tax evasion reveals a potential for a 'double dividend" environmental and welfare (excluding environmental benefits) improvements (10). The existence of this dividend is due to the changes in tax bases which occurs from changes in tax evasions. A crucial assumption is that tax evasion is positively, related to the tax rate. An increase in an environmental tax thus raises tax evasion and erodes the environmental tax. When the environmental tax increase is used to reduce labour taxes, evasion decreases, and, hence, there is an additional labour tax base increase. Results from the CGE simulations do not, however, show that such a double dividend exists, probably because of the large initial differences in environmental and labour tax bases.

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