The effectiveness of taxing the carbon content of energy consumption

Suphi Sen*, Herman Vollebergh

*Corresponding author for this work

Research output: Contribution to journalArticleScientificpeer-review

Abstract

We estimate the long-run effect of a broad-based carbon tax on energy consumption by using a new and unique cross-sectional dataset of effective energy tax rates of OECD countries. Our instrumental variables estimations, which exploit the positive correlation between the tax rates of neighboring countries, indicate a much higher effectiveness for carbon taxation than those from ordinary least square estimations. The validity of our identification strategy is consistent with the theories of strategic policy interaction in the presence of immobile tax bases. Our results show that a one euro increase in energy taxes reduces carbon emissions from fossil fuel consumption by 0.73 percent in the long run. (C) 2018 Elsevier Inc. All rights reserved.

Original languageEnglish
Pages (from-to)74-99
JournalJournal of Environmental Economics and Management
Volume92
DOIs
Publication statusPublished - Nov 2018

Keywords

  • Effective tax rates
  • Energy taxation
  • Energy consumption
  • Carbon dioxide emissions
  • IV estimation
  • HOUSEHOLD GASOLINE DEMAND
  • STRATEGIC INTERACTION
  • PRICE ELASTICITY
  • TAXES
  • METAANALYSIS
  • COMPETITION
  • REGRESSION
  • POLICY

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