The Role of Revenue Recycling Schemes in Environmental Tax Selection : A General Equilibrium Analysis
This study examines the roles of revenue recycling schemes for the selection of alternative tax instruments (i.e., carbon-, sulphur-, energy- and output-tax) to reduce CO2 emissions to a specified level in Thailand. A static, single period, multi-s...
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| Format: | Policy Research Working Paper |
| Language: | English |
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World Bank, Washington, DC
2012
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| Online Access: | http://documents.worldbank.org/curated/en/2007/11/8666999/role-revenue-recycling-schemes-environmental-tax-selection-general-equilibrium-analysis http://hdl.handle.net/10986/7546 |
| Summary: | This study examines the roles of revenue
recycling schemes for the selection of alternative tax
instruments (i.e., carbon-, sulphur-, energy- and
output-tax) to reduce CO2 emissions to a specified level in
Thailand. A static, single period, multi-sectoral computable
general equilibrium (CGE) model of the Thai economy has been
developed for this purpose. This study finds that the
selection of a tax instrument to reduce CO2 emissions would
be significantly influenced by the scheme to recycle the tax
revenue to the economy. If the tax revenue is recycled to
finance cuts in the existing labour or indirect tax rates,
carbon tax would be more efficient than the sulphur-,
energy- and output-taxes to reduce CO2 emissions. On the
other hand, if the tax revenue is recycled to households
through a lump-sum transfer, sulphur and carbon taxes would
be more efficient than energy and output taxes. The ranking
between the sulphur and carbon taxes under the lump sum
transfer scheme depends on substitution possibility of
fossil fuels. Sulphur tax is found superior over carbon tax
at the higher substitution possibility between fossil fuels;
the reverse is found true at the lower substitution
possibility. In all schemes of revenue recycling considered,
the output tax is found to be the most costly (i.e., in
welfare terms) despite the fact that it generates two to
three times higher revenue than the other tax instruments. |
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