A corrective tax or subsidy is “well-targeted” if it primarily affects choices that are more distorted by market failures. Energy efficiency subsidies are designed to correct multiple distortions: ...externalities, credit constraints, “landlord-tenant” information asymmetries, imperfect information, and inattention. We show that three important energy efficiency subsidies are primarily taken up by consumers who are wealthier, own their own homes, and are more informed about and attentive to energy costs. This suggests that these subsidies are poorly targeted at the market failures they were designed to address. However, we show that “tagging” can lead to large efficiency gains.
•Fossil fuel subsidies are large, amounting to 6.5% of global GDP in 2015.•Mispricing from a domestic perspective accounts for the bulk of the subsidy.•Coal subsidies account for the largest part ...(about half) of global subsidies.•In absolute terms, subsidies are highly concentrated in a few large countries.•The environmental, fiscal, and welfare gains from subsidy reform are substantial.
This paper estimates fossil fuel subsidies and the economic and environmental benefits from reforming them, focusing mostly on a broad notion of subsidies arising when consumer prices are below supply costs plus environmental costs and general consumption taxes.
Estimated subsidies are $4.9 trillion worldwide in 2013 and $5.3 trillion in 2015 (6.5% of global GDP in both years). Undercharging for global warming accounts for 22% of the subsidy in 2013, air pollution 46%, broader vehicle externalities 13%, supply costs 11%, and general consumer taxes 8%. China was the biggest subsidizer in 2013 ($1.8 trillion), followed by the United States ($0.6 trillion), and Russia, the European Union, and India (each with about $0.3 trillion). Eliminating subsidies would have reduced global carbon emissions in 2013 by 21% and fossil fuel air pollution deaths 55%, while raising revenue of 4%, and social welfare by 2.2%, of global GDP.
We develop a model of optimal taxation and redistribution under an ambitious climate target. We take into account vertical income differences, but also explicitly capture horizontal equity concerns ...by considering heterogeneous energy efficiencies. By deriving first- and second-best rules for policy instruments including carbon and labor taxes, transfers and energy subsidies, we investigate analytically how vertical and horizontal inequality is considered in the welfare maximizing tax structure. We calibrate the model to German household data and a 30 percent emission reduction goal and show that redistribution of carbon tax revenues via household-specific transfers is the first-best policy. Under plausible assumptions on inequality aversion, transfers to energy-intensive households should be about five times higher than transfers to energy-efficient households. Equal per-capita transfers do not require to observe households’ efficiency type, but increase equity-weighted mitigation costs by around 5 percent compared to the first-best. Mitigation costs increase by less, if the government can implement a uniform clean energy subsidy or household-specific tax-subsidy schemes on energy consumption and labor income that target heterogeneous energy efficiencies. Horizontal equity concerns may therefore constitute a new second-best rationale for clean energy policies or differentiated energy taxes.
We study the impact of emissions tax and emissions cap‐and‐trade regulation on a firm's technology choice and capacity decisions. We show that emissions price uncertainty under cap‐and‐trade results ...in greater expected profit than a constant emissions price under an emissions tax, which contradicts popular arguments that the greater uncertainty under cap‐and‐trade will erode value. We further show that two operational drivers underlie this result: (i) the firm's option not to operate, which effectively right‐censors the uncertain emissions price; and (ii) dispatch flexibility, which is the firm's ability to first deploy its most profitable capacity given the realized emissions price. In addition to these managerial insights, we also explore policy implications: the effect of emissions price level, and the effect of investment and production subsidies. Through an illustrative example, we show that production subsidies of higher investment and production cost technologies (such as carbon capture and storage technologies) have no effect on the firm's optimal total capacity when firms own a portfolio of both clean and dirty technologies, but that investment subsidies of these technologies increase the firm's total capacity, conditionally increasing expected emissions. A subsidy of a lower production cost technology, on the other hand, has no effect on the firm's optimal total capacity in multi‐technology portfolios, regardless of whether the subsidy is a production or investment subsidy.
We analyze the effects of the interactions that the two pillars of the European Union Common Agricultural Policy—market support and rural development—have on farmers' uptake of organic farming ...practices. Special attention is given to the 2003 reform, which substantially altered the relative importance of the two types of support by decoupling direct agricultural payments from the production of a specific crop. In our empirical analysis we study the case of Sweden, making use of the variation in the timing of farmers' decisions regarding participation in support programs. We estimate a dynamic non-linear unobserved effects probit model to account for unobserved individual heterogeneity and state dependence. Our results indicate the existence of a negative effect of the market support system in place when organic farming techniques were adopted before the 2003 reform. However, this effect is reversed by the introduction of decoupling. Furthermore, the effects of support differ between certified and non-certified organic production: both pillars have significant effects on non-certified organic farming, whereas certified organic farming is exclusively driven by agro-environmental subsidies.
In this research, we aim to understand the influence of government subsidies on enterprises’ research and development (R&D) investment behavior, particularly in China’s renewable energy sector. We ...are also interested in examining how the attributes of enterprise ownership act as a moderating variable for the relationship between government subsidies and R&D investment behavior. Three classical panel data analysis models including the pooled ordinary least squares (OLS) model, the fixed effect model and the random effect model are employed. We find that government subsidies have a significant crowding out influence on enterprises’ R&D investment behavior and that the influence is further moderated by the attributes of enterprise ownership. Moreover, a panel threshold regression model is used to demonstrate how the influence of government subsidies on enterprises’ R&D investment behavior will change when government subsidies increase. Two thresholds, 0.6% and 10.1%, are identified. We recommend that relevant government departments should motivate enterprise R&D investment behavioral intention by increasing subsidies within a certain range. Different attributes of enterprise ownership should also be considered as part of policy reform and re-structuring relating to government subsidies.
•Government subsidies have a significant crowding-out effect on enterprises’ R&D.•The moderating role of the attributes of company ownership is examined.•A panel threshold regression model is used to explore the influence of subsidy.•First examining the effect of subsidy in the renewable industry in China.
The game model of the duopoly automobile manufacturers established in this paper takes the carbon emission reduction policy constraint as the research background, and discusses how the electric ...vehicle and the fuel vehicle compete in the performance of the product in the delay pricing decision under the strategic consumer, which is seldom considered in other related studies. The government gives electric vehicle consumers preferential policies on consumption subsidies and exemption from consumption tax. Additionally, he levies consumption tax and sales carbon tax from fuel vehicle consumers and manufacturers, respectively. The government also supports the development of electric vehicles by establishing charging piles. This paper cast light on how different market structures and different adjusting speed of price work on the vehicle manufacturers' operation and the system's stability. At first, we consider a single period game to derive the optimal solutions, finding that government intervention policies can maximize the social welfare. Additionally, the impacts of tax and subsidy on social welfare are different when fuel vehicle manufacturer is leader. Then, we consider a repeated game where players make decision based on bounded rationality. We compare the optimal solutions and give a numerical simulation for the dynamic process. For fuel vehicle manufacturer, too much energy consumption triggers high emission tax and also lowers consumers' surplus. We also find that fuel vehicle manufacturer acting as the leader enables the system to be more stable than the scenario in the current vehicle industry condition, where the electric vehicle manufacturer acts as the leader.
•Based on consumer valuation function studied of government supplies subsidy.•Studied of levies tax to fuel vehicles' pollution.•Analyzed the complex characteristics of two different market structures.•Studied adjustment speed and market structure how to affect the social welfare.•Subsidy and infrastructure construction supports the development of electric vehicle.
Government subsidies play a vital role in enhancing firms' investment in research and development (R&D). The study's aim is to investigate the relationship between government subsidies (including ...government R&D and non-R&D subsidies), R&D investment and innovation performance of Chinese pharmaceutical listed companies over the period 2009-2015. The results show that government R&D subsidies can stimulate corporate R&D investment; government subsidies have no significant impact on innovation performance while R&D investment has a positive impact. In addition, we examine whether company ownership and executives' technological experience affect this relationship. We also find that there is a positive relationship between government R&D subsidies and R&D investment only in private-owned companies; R&D investment positively influences innovation performance in state-owned companies or in companies with R&D executives. This study provides some insights for managers and policymakers in making effective innovation strategies.
OPTIMAL TAX PROGRESSIVITY Heathcote, Jonathan; Storesletten, Kjetil; Violante, Giovanni L.
The Quarterly journal of economics,
11/2017, Letnik:
132, Številka:
4
Journal Article
Recenzirano
Odprti dostop
What shapes the optimal degree of progressivity of the tax and transfer system? On the one hand, a progressive tax system can counteract inequality in initial conditions and substitute for imperfect ...private insurance against idiosyncratic earnings risk. On the other hand, progressivity reduces incentives to work and to invest in skills, distortions that are especially costly when the government must finance public goods. We develop a tractable equilibrium model that features all of these trade-offs. The analytical expressions we derive for social welfare deliver a transparent understanding of how preference, technology, and market structure parameters influence the optimal degree of progressivity. A calibration for the U.S. economy indicates that endogenous skill investment, flexible labor supply, and the desire to finance government purchases play quantitatively similar roles in limiting optimal progressivity. In a version of the model where poverty constrains skill investment, optimal progressivity is close to the U.S. value. An empirical analysis on cross-country data offers support to the theory.
•Explore the impacts of environmental policies (tax vs. subsidy) on a supply chain.•Examine how they abate pollutions, reduce emissions, and enhance the social welfare.•Provide insights to the ...government about when to implement tax or subsidy policy.
This paper investigates the impact of two environmental policies: emissions abatement subsidy and emissions tax, on a three-tier supply chain where the manufacturer distributes through competitive retailers and invests in emissions abatement manufacturing technology. The government pursues social welfare maximization, while the manufacturer and retailers are profit driven. We find that the subsidy policy offers the manufacturer greater incentives to abate pollution and yields higher profits for channel members; however, when emissions abatement is very costly and production emissions are highly damaging, the tax policy should be implemented, as the subsidy policy leads to lower social welfare and environmental performance. Interestingly, we show that the manufacturer has no incentive to improve emissions abatement efficiency if the environmental damage of its production is high under the subsidy policy or low under the tax policy. The manufacturer always welcomes more downstream entry under the subsidy policy but not necessarily under the tax policy; each retailer always fares worse with more competition. More competition enhances social welfare under the tax policy but not necessarily under the subsidy policy. Furthermore, caution should be exercised when adopting the subsidy policy, because a “hazard zone” exists where society suffers but does not under the tax policy.
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