Arbeitspapier
The Effectiveness of Taxing Carbon Content of Energy Consumption
We estimate the long-run effect of a uniform carbon tax on energy consumption by using a new and unique dataset in which effective tax rates of OECD countries are calculated in terms of carbon dioxide emissions. The effective tax rates account for the widely discussed tax deductions for specific energy tax bases leading to a careful calculation of net tax rates faced by agents. We argue that taxation might be endogenous to energy consumption in the long run. In order to identify a causal effect, we document a positive correlation between the tax rates of neighboring countries which we then exploit in our instrumental variables estimations. Validity of our identification strategy is consistent with the strategic inter-governmental interaction theo-ries that lead to a spatial pattern in local government policies in the presence of immobile tax bases. Our instrumental variables estimations indicate that taxing carbon content of energy use can be an effective instrument for climate policy.
- Language
-
Englisch
- Bibliographic citation
-
Series: CESifo Working Paper ; No. 6003
- Classification
-
Wirtschaft
Energy: Demand and Supply; Prices
Energy: Government Policy
Taxation and Subsidies: Externalities; Redistributive Effects; Environmental Taxes and Subsidies
Single Equation Models: Single Variables: Instrumental Variables (IV) Estimation
- Subject
-
effective tax rates
energy taxation
energy consumption
carbon-dioxide emissions
IV estimation
- Event
-
Geistige Schöpfung
- (who)
-
Sen, Suphi
Vollebergh, Herman R. J.
- Event
-
Veröffentlichung
- (who)
-
Center for Economic Studies and ifo Institute (CESifo)
- (where)
-
Munich
- (when)
-
2016
- Handle
- Last update
- 10.03.2025, 11:41 AM CET
Data provider
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Object type
- Arbeitspapier
Associated
- Sen, Suphi
- Vollebergh, Herman R. J.
- Center for Economic Studies and ifo Institute (CESifo)
Time of origin
- 2016
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