سیاست CO2 ملی و خارجی: برخی از نتایج تعادل عمومی برای سوئیس

Switzerland, following the Kyoto agreement, plans to reduce CO2 emissions by 10% over the next decade with a tax on the use of fossil fuels. This policy, while having a marginal effect on global CO2 emission levels, will have a positive effect on local environmental quality. However, since different sources of energy produce different local external effects, a uniform CO2 tax is ill targeted. This paper shows that a policy setting tax rates equal to the lower bounds of the estimated local marginal external effects would reduce the national CO2 level by 30%. Using a computable general equilibrium model of the Swiss economy, it also finds substantial efficiency gains of Pigovian taxes as compared to a uniform CO2 tax.

Concerns about global warming have elevated environmental policy to the forefront of the political agenda of the international community. Negotiations at several UN conferences have resulted in a multilateral agreement in which the industrialised countries agreed on reducing national CO2 emissions levels by 5% on average from 1990 levels by 2012.1 However, most national parliaments have not yet ratified the Kyoto Protocol and its implementation has only started in some European countries. With the refusal of the new US administration to ratify the protocol, the process has in fact reached an impasse. There appears to exist two obstacles against an implementation of the protocol. Firstly, interest groups, which will be negatively affected, are opposed and thus lobby against an active CO2 policy. Secondly, the impact of emission reductions in rather small countries on global CO2 emission flows is marginal. Thus, for small countries the incentive to free ride on an international CO2 policy is high. Notwithstanding, the Scandinavian countries, the Netherlands and most recently Germany have introduced energy taxes in order to curb CO2 emission levels.2 This unilateral action may be explained by the fact that local public goods such as clean air, road safety, absence of noise etc. are also affected by energy taxes. An increase in the price of fossil fuels will decrease the amount of polluting activities and thus increase local environmental quality. However, a CO2 tax is not a well-targeted instrument for a local internalisation policy because different sources of fossil fuels cause varying local external cost. Rather, in order to address external effects efficiently, environmental policy should impose a differentiated tax scheme. In this paper, we employ a computable general equilibrium model (CGEM) of the Swiss economy and tax system, in which a range of external effects are included explicitly. The focus of our paper is on the consequences of an internalisation of local externalities for CO2 emissions and national welfare. In particular, the model incorporates Pigovian taxes on the use of gasoline, diesel, heating oil and natural gas based on estimations of the corresponding external effects. One main finding of the paper indicates that the reduction in the use of fossil fuels due to a local internalisation strategy is much higher than the amount Switzerland has agreed on in the international protocol on climate change. The second central result points to a substantial efficiency gain of such an internalisation strategy as compared to a uniform CO2 tax. In all scenarios, we follow an ‘equal yield’ approach and refund the additional revenue to households lump-sum or cut labour income taxes to preserve equal tax yield. Since the existing labour tax is distortionary, the use of the Pigovian tax yield to reduce the labour tax will produce a weak double dividend.3 In conformity with other studies,4 our model calculates a substantial second dividend of environmental policy. CGEM have already been employed to analyse the interaction between the environment and the fiscal system. Closest to the present paper comes Ballard and Medema (1993), who calculate the marginal efficiency effects of environmental taxes in the presence of externalities. Ballard and Medema (1993) calibrate sector-specific abatement technologies and a health damage function in the household sector but do not incorporate CO2 in their model. By contrast, this paper imposes an (exogenous) Pigovian tax on the use of each of the four fossil fuels and calculates the effects on total CO2 emissions. Boyd et al. (1995) concentrate in their CGEM of the US economy on the cost of a uniform CO2 tax taking into account exogenous local externalities. They compute a so-called no-regrets amount of CO2 emissions between 8 and 64%.5 Contrary to the present paper, no differentiation of the CO2 tax with respect to the amount of externalities caused by different fossil fuels is made, and additional tax revenues are refunded in a lump-sum to the households. Boyd et al. (1995) thus do not consider the weak double dividend that can be reaped when the environmental tax revenue is used to cut distortionary taxes such as the labour income tax. Bovenberg and Goulder (1996), while incorporating the second-best nature of environmental taxes, do not consider local externalities. In line with Sandmo, 1975 and Ballard and Medema, 1993 and Bovenberg and de Mooij (1994), they find the second-best Pigovian tax rate to be lower than the marginal external benefit.6 This paper is a combination of these previous papers, as it simultaneously considers differing external cost in the use of fossil fuels, the consequences of an internalisation strategy for CO2 emissions and the distortion of the existing tax system. It does so by applying a 38-sector CGEM of the Swiss economy and tax system, based on 1990 data. In the next section, we present a brief overview of the existing external cost estimates in Switzerland and calculate the tax rates needed to internalise the externalities of gasoline, diesel fuel, heating oil and natural gas use. Section 3 characterises the CGEM and different internalisation strategies. Results follow in Section 4. Section 5 is a brief summary.

The reduction of greenhouse gas emissions is a global public good, and the welfare gain of a unilateral CO2 reduction is negligible for most countries. The corresponding free rider problem has been tackled by the international community at several UN conferences. In Kyoto, the industrialised countries have agreed to reduce their emissions by 5% on average until 2012. However, with the USA's refusal to ratify, there is little hope for a swift implementation of the Kyoto agreement. This paper thus addresses the question on the possibilities of an individual country to meet the international CO2 standard in an efficient way. While it is undisputed that a CO2 tax reduces emissions at minimal cost, it must be considered that the use of fossil fuels produces further external effects which, in contrast to CO2 emissions, are local public bads and hence give rise to significant welfare losses within a given country. Consequently, a country should take into consideration these local external effects when formulating a national CO2 policy. As a matter of fact, the internalisation of local external effects should be given priority when formulating a national environmental policy. Moreover, an additional CO2 policy is needed only when the local internalisation strategy does not result in a reduction of CO2 emissions sufficient to meet the international commitment. This paper addresses the international environmental policy of a country based on national environmental goods using a highly desaggregated CGEM of the Swiss economy. The simulations indicate that the internalisation of local externalities reduces Swiss CO2 emissions by 30–50% depending on the estimated amount of external effects of fossil fuels uses. The associated welfare gain, including the improvement in environmental quality, amounts to between one and five billion Swiss Francs. The corresponding cuts in CO2 emissions exceed the emission goal to which Switzerland has agreed by at least a factor of 3. Given these findings, we have reason to believe that if all the countries followed an exclusively national environmental strategy and internalised their local externalities, the global climate problem, as a by-product, would be much reduced if not solved. Since different sources of fossil energy cause varying local external cost, an optimal internalisation policy applies a differentiated tax scheme. In Switzerland, the external cost of gasoline and diesel are higher than of heating oil and natural gas. As a consequence, a uniform CO2 tax that attains the same amount in CO2 emission reductions overtaxes oil and gas and therefore produces a welfare gain that is between 150 and 300 millions smaller relative to a differentiated Pigovian approach.