اصلاح مالیاتی زیست محیطی و پیش بینی تولید کننده: تجزیه و تحلیل موقتی تعادل عمومی قابل محاسبه

This article analyzes the nonenvironmental welfare costs of an environmental tax reform using a numerical intertemporal general equilibrium model for the Norwegian economy. By exploiting existing tax wedges in the labor market and between consumption and saving, the total nonenvironmental welfare effect of the tax reform is positive. The article also analyzes how imperfect price expectations for the investors in real capital influence the total welfare costs of the tax reform. The welfare effect is the same due to exploitation of initial distortions, but the transitional dynamics are quite different in the two paths.

By increasing environmental taxes to curb pollution and using the revenues to cut distortionary taxes on income, it may be possible to obtain a “double dividend,” i.e., not only a better environmental standard, but also a less distortionary tax system, thereby improving economic welfare. Goulder (1994) and Christiansen (1996) discuss different interpretations and definitions of the term “double dividend,” and give an overview of the literature. In recent years there has been increasing concern about the potential contributions of carbon dioxide (CO2) emissions to the greenhouse effect and global climate change. A carbon tax, a tax on fossil fuels—coal, oil, crude oil and natural gas—in proportion to their carbon content, will internalize these externalities associated with fossil fuel combustion. It is clear that the introduction of a carbon tax combined with changes in other taxes will, through their effects on prices and costs, have long-term welfare effects through changing the rate of capital accumulation and economic growth. Hence, the suitable model framework is intertemporal general equilibrium models that generate optimal consumption-savings paths. Intertemporal general equilibrium analyses of such environmental tax reforms for the United States are presented in Jorgenson and Wilcoxen (1993), Goulder (1995), and Bovenberg and Goulder (1995). Recent Norwegian analyses of environmental tax reforms as Brendemoen and Vennemo (1994), Håkonsen and Mathiesen (1995), and Mathiesen (1996),1 are all based on static general equilibrium models with exogenous stocks of real and financial capital. Hence, these analyses only consider reallocation effects of the tax reforms, given the resource constraints, and do not consider the effects of the tax reforms on the accumulation of real and financial capital. In addition the models allow for terms of trade gains from domestic tax increases, a property that is much criticized (see, e.g., Norman, 1990). There is a need for additional analyses that take into consideration the dynamic effects of environmental tax reforms and where the tax reforms do not give rise to terms of trade gains. The analyses by Jorgenson and Wilcoxen (1993), Goulder (1995), and Bovenberg and Goulder (1995) all use intertemporal models, but a small open economy as the Norwegian behaves and reacts differently under tax reforms, compared to a large economy as the U.S. This demands another model specification that implies that analyses on the Norwegian economy will give additional insight into measuring and interpreting the effects of environmental tax reforms. Compared to these U.S. analyses, the small open economy framework implies that the interest rate and prices on export are given in the world market. The assumption of internationally mobile capital implies that net savings in financial capital may be uncorrelated with net investment in real capital. In addition, the tax rates in Norway are generally higher. The marginal excess burden of labor taxation is especially high (see Brendemoen and Vennemo, 1996). All these elements may contribute to give other welfare implications of environmental tax reforms than the above cited U.S. analyses. The analysis in this paper is also based on the tax system of the 1992 tax reform,2 which especially implied approximate neutrality between the taxation of real and financial capital, and lower average marginal tax rate on wage income. This paper analyzes the total nonenvironmental welfare costs of an increase in the carbon tax combined with a reduction in the payroll tax by using an intertemporal disaggregated general equilibrium model for the Norwegian economy. The model pictures a small open economy because the domestic producers and consumers are assumed to be price takers in the world market, and the interest rate is exogenously given from international financial markets. But the producers are assumed to execute some market power in the domestic market. The total welfare effect of the tax reform measured as the change in total discounted utility from a reference path, is positive, due to exploitation of existing tax wedges, especially in the labor market and between consumption and saving. This paper also examines whether the welfare effect is sensitive to expectation formation. The welfare gain is approximately the same with imperfect expectations equal to unchanged expectations from the reference path, but the transitional paths are quite different in the two simulations. The reason for these differences is the negative effect of the tax reform on the domestic producer prices, implying negative capital gains in the user cost of capital along the transitional path with perfect foresight, while the negative capital gains are absent with unchanged expectations. This initializes reallocation of saving from financial to real capital along the path, increasing net foreign debt, which induces a welfare loss. This negative effect is though outweighed by the positive welfare effect of higher employment, especially in the announcement period, but also in the stationary solution. The paper is organized as follows: Section 2 gives some comments on the literature concerning the double dividend hypothesis and the possibilities for obtaining welfare gains through environmental tax reforms. Section 3 describes the model framework, data, and important parameter values. In Section 4, the simulations of the environmental tax reform are presented and interpreted, including the simulation with imperfect expectations. Section 5 concludes.

This paper has analyzed the nonenvironmental welfare costs of carbon taxes and the possibilities of obtaining a double dividend with an environmental tax reform, in an intertemporal general equilibrium framework. There are several features of the model that make it substantially different from other CGE models used for analyzing the effects of carbon taxes on the Norwegian economy. An intertemporal model, where the agents have perfect foresight, gives endogenous accumulation of both real and financial capital, and a consistent welfare measure by total discounted utility. In addition, producers are price takers in the world market, which implies that it is not possible to obtain terms of trade gains following domestic tax increases. The analysis shows that it is possible to obtain a double dividend by introducing a CO2 tax of 700 NOK, which increases the prices of heating oils, transport oils, and gasoline of 50, 60, and 10 percent, respectively, and using the tax revenue to reduce the payroll tax, by exploiting existing tax wedges in the labor market and between consumption and saving. This paper also analyzes how imperfect price expectations for the investors influence the welfare costs of the tax reform. The welfare gain is approximately unchanged when changing expectations from perfect to imperfect, but the transitional paths are quite different. The reason for these differences is the negative effect of the tax reform on the domestic producer prices, implying negative capital gains in the user cost of capital along the transitional path with perfect foresight, while the negative capital gains are absent with unchanged expectations. This initializes reallocation of saving from financial to real capital along the path, increasing net foreign debt, which induces a welfare loss. The negative effect is, though, outweighed by the positive welfare effect of higher employment. The results in this study should be kept in perspective. The welfare gain of the tax reform is very small, but small welfare effects are common in numerical analyses of tax reforms (see, e.g., Auerbach 1989 and Goulder 1995). There are no economy–environment–economy feedbacks in the model, which would have given an additional positive effect on total welfare in this analysis. It is also obvious that the assumption of complete factor mobility must be important for the welfare costs of the tax reform. Analyzing the effects of environmental tax reforms using a dynamic model framework with economy–environment–economy feedbacks and restricted short-run factor mobility, is left for further research. Ballad Shoven Whalley 1985