مالیات انرژی در یک اقتصاد باز کوچک : دستاوردهای بهره وری اجتماعی در مقابل نگرانی های صنعتی

Welfare analyses of energy taxes typically show that systems with uniform rates perform better than differentiated systems, especially if revenue can be recycled by cutting taxes that are more distortionary. However, in practical policy, efficiency gains must be traded off against industrial concerns. Presumably, energy-dependent industries of small, open economies will suffer relatively more if taxed. This computable general equilibrium (CGE) study examines the social costs of compensating the energy-intensive export industries in Norway for their profit losses from imposing the same electricity tax on all industries. The costs are surprisingly modest. This is explained by the role of the Nordic electricity market, which is still limited enough to respond to national energy tax reforms. Thus, an electricity price reduction partly neutralizes the direct impact of the tax on profits. In addition, we examine the effects of different compensation schemes and find significantly lower compensation costs when the scheme is designed to release productivity gains.

Much of the empirical literature finds that energy tax exemptions and concessions tend to be costly compared with uniform taxation (Böhringer and Rutherford, 1997, Ekins and Speck, 1999, Felder and Schleiniger, 2002 and Bye and Nyborg, 2003). This result is reinforced if the fact that the implicit renouncement of tax revenue could be used to cut other, more distortionary taxes is accounted for; see contributions in Goulder et al. (1997), Farrow (1999), Fullerton and Metcalf (2001), Parry et al. (1999), and Bovenberg (1999). In spite of these findings, several countries have exempted selected energy-dependent industries from energy taxation. The design of energy tax systems is likely to be affected by political pressure groups; see Pearce (2006) for the case of the UK Climate Change Levy. Hence, a plausible explanation for the exemptions has to be sought in the fact that these industries constitute powerful lobby groups. The main question posed in this analysis arises from this apparent trade-off between overall efficiency and industrial distribution arguments. We ask whether the welfare potential of equalizing tax rates tends to erode if combined with compensatory transfers to energy-intensive industries. Existing analyses of large economies have found rather small compensation costs. However, there are reasons to expect larger costs, the smaller and the more open is the economy. This study examines the case of compensating the energy-intensive export industries in a small, open economy, Norway. This may be a case for less optimistic conclusions. The existing studies of large economies include Bovenberg and Goulder (2001), who address uniform CO2 taxation in the US's case. Their conclusion is that the welfare gain is reduced by only one-tenth if the reform is accompanied by compensation for profit losses in the American energy industry. In addition, Böhringer and Rutherford (1997) find that avoiding layoffs in the German energy industry is less costly when combining a uniform CO2 tax with wage subsidies to the industry compared with using CO2 tax exemptions. However, these results rely heavily on the fact that the energy industries are sufficiently large to affect prices in the markets for energy products. In the large industry case, tax changes will affect market prices and most of the CO2 tax burden will shift onto buyers. Thus, after compensation, significant parts of the revenue remain for cuts in other, distortionary tax wedges. However, the smaller and the more open the country is, the more exposed firms will be to externally given world market prices and conditions, and the smaller will be the scope for shifting tax burdens onto demanders or suppliers through price incidences. This makes the case of the Norwegian energy-intensive export sector different and worth examining. The sector, which comprises the three industries producing metals, pulp and paper articles, and industrial chemicals, first consumes energy in the form of electricity, of which it accounts for one-third of total consumption. Therefore, this analysis will focus on the electricity tax system. In the present electricity tax system, all manufacturing industries are exempted, whereas final consumers, primary industries, and service industries, including transportation and construction, pay a rate of 1.2 Eurocents/KWh. The current electricity production is mainly based on hydropower, and the two expressed reasons for taxing electricity consumption are to protect the environment (waterfalls and rivers) and to raise public revenue. The environmental arguments will become more relevant in the future, as it is expected that power based on natural gas will become profitable within the next few decades. Previous analyses indicate that the trade-off issue between efficiency and political feasibility is relevant to Norwegian electricity price policies. In a partial electricity market study, Bye et al. (1999) find that more harmonized electricity prices across users would improve overall consumer and producer surplus but at the expense of the energy-intensive export sector. The sector is important in regional policy considerations because of its peripheral location. Furthermore, the sector is politically influential because aside from the oil and gas sector, it is the largest generator of export revenues, contributing with 15% of the Norwegian total export revenue in 1999. Its high degree of exposure to internationally given product prices makes the sector highly vulnerable to cost changes. In addition, the sector buys their input of power in an electricity market that has undergone major liberalization over the last decade and is now fully integrated into a Nordic market. This has limited the possibilities for cost changes to be passed on in the form of higher electricity prices. As it is regarded as a pioneer in many respects, a study of the Nordic market is worthwhile. Similar processes are now taking place in several electricity markets worldwide; see Wolak (2000) for a survey. We employ a computable general equilibrium (CGE) model in order to obtain an economy-wide perspective. We acknowledge that a wide range of industry-specific particularities will then have to be disregarded to avoid overcomplexity. However, an economy-wide approach is necessary in order to examine how behavioral adjustments in the directly affected market will induce changes in adjacent factor and output markets, and so forth. As the model accounts for a wide range of market and policy distortions present in the economy, indirect market reallocations might be important to the welfare implications. The general approach also reflects the role of macroeconomic constraints, like sustainability conditions preventing foreign debt from exploding, and labor and other factor market equilibrium conditions. These will be reflected in market prices and eventually feed back into the electricity market outcome. Moreover, the ability of the model to consistently shed light on public revenues and recycling effects is crucial to the problems we address. The model computations reveal that tax equalization is welfare improving, especially if the extra revenue is spent on cutting labor taxes responsible for a suboptimally low labor supply. Compensation binds some of the increased tax revenue within the energy-intensive sector, instead of releasing it for tax cuts or other welfare-improving reforms. The compensation cost is measured to between 16% and 44% of the initial welfare gain. The cost depends on the design of the compensation scheme, in particular on the degree of productivity gains released by the scheme. The characteristics of the Norwegian manufacturing industries are consistent with the existence of monopolistic competition among firms that produce different varieties of each good, so that their products are not completely substitutable. If there are preferences for variety among the buyers, then the higher the number of varieties, the higher the efficiency value of the good. As the model includes such so-called love-of-variety effects ( Dixit and Stiglitz, 1977), compensation costs turn out to be lower if compensation is offered in a manner that avoids the exit of firms from the energy-intensive export sector (or that encourages entry). Irrespective of the nature of the compensation scheme, the compensation costs turn out to be surprisingly low and are far from eroding the welfare gain of the reform. The main explanation is that scope remains for the Norwegian demand and supply impulses to influence the Nordic market prices of electricity. To increase the relevance of this study to electricity markets at other stages of trade liberalization and free competition, we perform sensitivity analyses that test the role of these electricity market characteristics. We find that with no flexibility in the international trade in electricity, the compensation costs fall to one-third, whereas a hypothetical world market regime with completely externally determined electricity prices leaves little scope for tax incidence, and compensation costs more than double. The paper proceeds by presenting the methodological aspects of the analysis in Section 2, including the basic features of the CGE model and the design of the analysis. Section 3 outlines and discusses the results and illustrates their sensitivity to the electricity market openness and the compensation scheme design. Section 4 concludes the paper.

Given that today's favoring of the energy-intensive export sector is an unavoidable part of the Norwegian political surroundings, this analysis shows that there may exist other, less expensive, ways of maintaining profits than exempting the sector from electricity taxes. We illustrate that equalizing the electricity tax and at the same time compensating for the losses of profits can be welfare improving, compared with the current system. The costs associated with compensating the energy-intensive export sector are surprisingly modest because the sector is highly reliant on prices given externally on world markets and there is little scope for shifting tax burdens onto demanders. However, we identify tax shifting onto suppliers of electricity in the Nordic market. Although internationalized over the last decade, the market still responds considerably to Norwegian policy changes. However, in Northern Europe, as in many regions, electricity markets are in a continuous process of deregulation and expansion, and this will tend to increase the political costs of removing energy tax exemptions. In addition, we point out the advantage of designing schemes that release possible productivity externalities within the sector. Stimulating entry of new firms may have such effects, either through love-of-variety effects, as in our model, or through other productivity-enhancing mechanisms such as creative destruction or embodied technological change. Equilibrium modeling typically involves a long-run perspective. A main drawback of this feature is that the transition costs of policy reforms are left out. The equilibrium assumption implies that capital and labor find new employment in the short run, thus ignoring costs like unemployment and extraordinary scrapping of capital equipment. This omission tends to overestimate the welfare gains of the reforms, especially of the reference reform, where compensation that could keep firms within the energy-intensive export sector is excluded. In a real-world application, the government lacks information about firm-specific features and future markets and, hence, about the size of losses of profits resulting from an energy tax reform. Consequently, it is not straightforward to set the level of compensation. We abstracted from such constraints in our model simulations where the government has full information. The aim of this study is to contribute to the discussion of a possible national trade-off between efficiency and industrial concerns. One can argue that this is a restrictive ambition, given last decade's increasing concern for efficiency in a wider sense, emphasizing international resource allocation and distortions to trade and competition. Indeed, the discriminatory electricity tax system of Norway has recently been declared illegal according to the competition rules within the European Economic Area (EEA). Our analysis provides some results that are relevant to this situation. We show that there is no conflict between such competition concerns and national welfare concerns, as removing the discriminatory practice results in an efficiency gain to the reforming country. However, our experiment does not contribute to settling how a nation's industrial ambitions should be handled in the presence of the new international directions. The current competition rules of the EEA simply do not leave much scope for targeting support to specific industries or regions. Our highly abstracted and simplified lumpsum compensation schemes should only be understood as references for comparing the national efficiency costs of alternative designs, and not as suggestions for practical policymaking. Although they are beyond the scope of this study, we strongly acknowledge the importance of legacy and practicability considerations. Shedding light on tensions between national and international concerns can nevertheless be useful. The essential flexibility of the international rules and their interpretations can only be ensured if the ongoing juridical discussions are constantly influenced by new information.