The general equilibrium incidence of environmental taxes

By D. Fullerton, Garth Heutel. 2007

203 citations recorded by the source corpus.

Abstract We study the distributional effects of a pollution tax in general equilibrium, with general forms of substitution where pollution might be a relative complement or substitute for labor or for capital in production. We find closed form solutions for pollution, output prices, and factor prices. Various special cases help clarify the impact of differential factor intensities, substitution effects, and output effects. Intuitively, the pollution tax might place disproportionate burdens on capital if the polluting sector is capital intensive, or if labor is a better substitute for pollution than is capital; however, conditions are found where these intuitive results do not hold. We show exact conditions for the wage to rise relative to the capital return. Plausible values are then assigned to all the parameters, and we find that variations over the possible range of factor intensities have less impact than variations over the possible range of elasticities.

Subfields: Economics and Econometrics, Renewable Energy, Sustainability and the Environment

View Paper: https://www.semanticscholar.org/paper/0e77dd1498aef9e46ec8a68283303b47f1fd1365

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Citations in the corpus

Distributional and Efficiency Impacts of Clean and Renewable Energy Standards for Electricity (2012, background): “…on the uses and sources side of income.3 Sources side effects have been shown to be critical for assessing the incidence of environmental policies (Fullerton and Heutel, 2007; Rausch et al., 2011a), but the scope of a partial equilibrium electric-sector analysis implies that that those effects…”
Who Pays a Price on Carbon? (2009, background): “Depending on the price elasticity of demand for other energy-intensive products, this would be expected to reduce the regressivity of a price on carbon.29 Second, some of the costs may be borne by factors of production, such as labor, capital or natural resource owners (Fullerton and Heutel 2007).”
The Valuation Relevance of Greenhouse Gas Emissions under the European Union Carbon Emissions Trading Scheme (2015, background): “Thus, the results indicate that a firm’s latent carbon liability is mitigated by its carbon cost pass on ability as reflected in its relative carbon emissions efficiency, consistent with arguments advanced by Grainger and Kolstad (2010), Fullerton and Heutel (2007), and IRRC Institute and Trucost (2”
The General Equilibrium Incidence of Environmental Mandates (2005, unknown): “Our model is similar to that in Fullerton and Heutel (2007), where we analyze a tax on emissions.”
Distributional Impacts of Carbon Pricing: A General Equilibrium Approach with Micro-Data for Households (2011, unknown): “By 2050 the producer price is falling for reasonably stringent carbon policies.1 Fullerton and Heutel (2007) construct an analytic general equilibrium model to identify the various key parameters and relationships that determine the ultimate burden of a tax on a pollutant.”