Energy Tax Exemptions and Industrial Production

Arbeitspapier

Environmental policies are often accompanied by exemptions for energy-intensive and trade-exposed industrial firms to avoid leakage from regulated to unregulated jurisdictions. This paper investigates the impact of a large electricity tax exemption on production levels, employment, and input choices in the German manufacturing industry. For two different policy designs, we show that exempted plants significantly increase their electricity use. This effect is considerably larger under a notched exemption policy, where passing an eligibility threshold yields infra-marginal benefits, compared to a revised policy where these benefits have been largely removed. We de-tect no significant impact of the exemptions on production levels, export shares, and employment. Using counterfactual simulations, we document substantial distortive effects of notched exemption policies when financial stakes are high and compliance cost for firms are low.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 10232

Classification and Topics

• Classification: Wirtschaft ; Firm Behavior: Empirical Analysis ; Taxation and Subsidies: Externalities; Redistributive Effects; Environmental Taxes and Subsidies ; Industry Studies: Manufacturing: General ; Energy: Demand and Supply; Prices
• Subject: environmental policy ; leakage ; energy taxes ; manufacturing industry

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Gerster, Andreas ; Lamp, Stefan
• Event: Veröffentlichung
• (who): Center for Economic Studies and ifo Institute (CESifo)
• (where): Munich
• (when): 2023

Further information

• Handle: http://hdl.handle.net/10419/271876
• Last update: 10.03.2025, 11:42 AM CET