SABIIA - Sistema Aberto e Integrado de Informação em Agricultura (Sabiia)

This paper draws on a number of recent studies to shed light on several policy issues raised by the impact of environmental policies on technological innovation. First, to what extent does induced innovation raise the overall net benefits to society from environmental policies? Second, how does induced innovation affect the appropriate choice among alternative environmental policy instruments? Third, how does it affect the optimal stringency of environmental regulations? Fourth, should environmental policies be supplemented with additional policies to promote innovation, such as research contracts or prizes for new technologies?

Policy Analysis in a Second-Best World

Palavras-chave: Environment; Technological innovation; Pollution control; Instrument choice; Environmental Economics and Policy; Q28; O38.

Ano: 2001

URL: http://purl.umn.edu/10797

Parry, Ian W.H.; Oates, Wallace E..

This paper first describes the new literature in environmental economics on the socalled "double dividend" and then explores its implications for a broad range of economic issues. The basic finding in this literature is that in a second-best, general equilibrium setting, environmental measures raise costs and prices and thereby reduce the real wage. This rise in the cost of living reduces slightly the quantity of labor supplied in an already highly distorted labor market, giving rise to losses in social welfare that can be large relative to the basic welfare gains from improved environmental policy. These losses may be offset to some extent by using revenues (if any) from the environmental programs to reduce existing taxes on labor. This same line of...

How Important is Technological Innovation in Protecting the Environment?

Palavras-chave: Regulatory policies; Welfare effects; Pre-existing taxes; General equilibrium; Environmental Economics and Policy; L51; H23; D52.

Ano: 1998

URL: http://purl.umn.edu/10687

Parry, Ian W.H.; Pizer, William A.; Fischer, Carolyn.

Economists have speculated that the welfare gains from technological innovation that reduces the future costs of environmental protection could be a lot more important than the "Pigouvian" welfare gains over time from correcting a pollution externality. If so, then a primary concern in the design of environmental policies should be the impact on induced innovation, and a potentially strong case could be made for additional instruments such as research subsidies. This paper examines the magnitude of the welfare gains from innovation relative to the discounted Pigouvian welfare gains, using a dynamic social planning model in which research and development (R&D) augments a knowledge stock that reduces future pollution abatement costs. We find that the...

Instrument Choice for Environmental Protection When Technological Innovation Is Endogenous

Palavras-chave: Environmental Economics and Policy.

Ano: 2000

URL: http://purl.umn.edu/10883

Fischer, Carolyn; Parry, Ian W.H.; Pizer, William A..

This paper presents an analytical and numerical comparison of the welfare impacts of alternative instruments for environmental protection in the presence of endogenous technological innovation. We analyze emissions taxes and both auctioned and free (grandfathered) emissions permits. We find that under different sets of circumstances each of the three policies may induce a significantly higher welfare gain than the other two policies. In particular, the relative ranking of policy instruments can crucially depend on the ability of adopting firms to imitate the innovation, the costs of innovation, the slope and level of the marginal environmental benefit function, and the number of firms producing emissions. Moreover, although in theory the welfare impacts of...

Should Corporate Average Fuel Economy (CAFE) Standards Be Tightened?

Palavras-chave: Technological innovation; Externalities; Environmental policies; Welfare impacts; Environmental Economics and Policy; Q28; O38; H23.

Ano: 1998

URL: http://purl.umn.edu/10812

Parry, Ian W.H.; Fischer, Carolyn; Harrington, Winston.

This paper develops analytical models to estimate the welfare effects of higher Corporate Average Fuel Economy (CAFE) standards on new passenger vehicles. The analysis incorporates a broad range of fuel-and-driving-related externalities, fuel taxes, different assumptions concerning consumers' valuation of fuel saving technologies and their alternative value in enhancing other vehicle attributes, and endogenous vehicle fleet composition. To implement the analysis, we develop estimates of CAFE's impact on local pollution, nationwide congestion, and traffic accidents. We find that higher fuel economy standards can produce anything from moderate welfare gains, to very little or no effect, to substantial welfare losses, depending on how consumers value fuel...

Tax Deductible Spending, Environmental Policy, and the "Double Dividend" Hypothesis

Palavras-chave: Fuel economy standards; Oil dependency; Carbon emissions; Rebound effect; Gasoline tax; Resource /Energy Economics and Policy; R48; Q48; H23.

Ano: 2004

URL: http://purl.umn.edu/10605

Parry, Ian W.H.; Bento, Antonio M..

A number of recent studies have shown that the general equilibrium welfare effects of externality-correcting policies depend importantly on pre-existing taxes in the economy, particularly those that distort the labor market. This paper extends the prior literature by allowing for consumption goods that are deductible from labor taxes. These "goods" represent medical insurance, other less tangible fringe benefits, mortgage interest, and so on. The initial tax system effectively subsidizes tax-favored consumption relative to other consumption, in addition to distorting the labor market. We find that incorporating tax-favored consumption may overturn key results from earlier studies. In particular, a revenue-neutral pollution tax (or auctioned pollution...

Productivity Trends in the Natural Resource Industries

Palavras-chave: Environmental policies; Distortionary taxes; Tax deductions; Welfare effects; Environmental Economics and Policy; H23; Q28; L51.

Ano: 1999

URL: http://purl.umn.edu/10737

This paper examines multi-factor productivity trends in the U.S. petroleum, coal, copper and logging industries since 1970. Measures of multi-factor productivity growth are negative for all four industries during the 1970's. At the time this led to fears that stocks of natural resources were being exhausted, and this might hinder future economic growth. However in retrospect the 1970's look like an exceptional period, rather than marking a change in long run productivity trends. The decline in measured multi-factor productivity in that decade appear to be explained by a number of special factors that generally have a transitory rather than a permanent effect on productivity growth. For example, the rise in natural resource prices encouraged the entry of...

Comparing Alternative Policies to Reduce Traffic Accidents

Palavras-chave: Productivity; Natural resources; Technological innovation; Depletion effect; Productivity Analysis; Q30; O30.

Ano: 1997

URL: http://purl.umn.edu/10585

This paper derives and implements formulas for the welfare effects of differentiated and uniform mileage taxes, gasoline taxes, and per mile insurance premiums, for reducing the external costs of passenger vehicle accidents. The model distinguishes three driver groups and five vehicle groups, and we obtain estimates of external accident costs per mile for each group from crash data. The (average) external accident cost is estimated at 2.2-6.6 cents per mile. Accidents costs differ substantially across drivers of different ages, but only moderately across different vehicles groups. Annual welfare gains from a mileage tax differentiated across drivers and vehicles according to marginal external costs are $9.4 billion in the benchmark case. The uniform...

Estimating the Welfare Effect of Congestion Taxes: The Critical Importance of Other Distortions Within the Transport System

Palavras-chave: Traffic accidents; External costs; Pricing policies; Insurance reform; Public Economics; R48; H22; H23.

Ano: 2003

URL: http://purl.umn.edu/10674

Parry, Ian W.H.; Bento, Antonio M..

This paper uses analytical and numerical models to illustrate how the presence of other distortions within the transport system changes the overall welfare effect of a congestion tax. These other distortions include a transit fare subsidy, congestion on competing (unpriced) routes, accident externalities, gasoline taxes, and pollution externalities. Each of these pre-existing distortions can substantially alter the welfare effect of a congestion tax that would be predicted by a first-best analysis. If congestion taxes encourage travel on other congested routes, they can produce sizeable indirect welfare losses. In addition, induced reductions in the demand for gasoline can lead to substantial welfare losses when, as appears to be the case for European...

Corporate Codes of Conduct: Is Common Environmental Content Feasible?

Palavras-chave: Congestion tax; Welfare effect; Transit subsidy; Gasoline tax; Accidents; Pollution; Public Economics; R41; H21; H23.

Ano: 2000

URL: http://purl.umn.edu/10678

Fischer, Carolyn; Parry, Ian W.H.; Aguilar, Francisco X.; Jawahar, Puja.

In a developing country context, a policy to promote adoption of common environmental content for corporate codes of conduct (COCs) aspires to meaningful results on two fronts. First, adherence to COC provisions should offer economic benefits that exceed the costs of compliance; i.e., companies must receive a price premium, market expansion, efficiency gains, subsidized technical assistance, or some combination of these benefits in return for meeting the requirements. Second, compliance should produce significant improvements in environmental outcomes; i.e., the code must impose real requirements, and monitoring and enforcement must offer sufficient incentives to prevent evasion. With those goals in mind, we explore options for establishing common...

The Costs of U.S. Oil Dependency

Palavras-chave: Corporate social responsibility; Codes of conduct; Environmental management; Environmental Economics and Policy; Q2; O19.

Ano: 2005

URL: http://purl.umn.edu/10889

Parry, Ian W.H.; Darmstadter, Joel.

This paper first describes trends and future predictions of factors that determine U.S. dependence on oil and oil imports. We then review evidence on the oil premium, that is, the extent to which the costs to the United States as a whole from extra oil consumption may exceed the private costs to individual oil users. The premium has two main components: one reflects the risk of macroeconomic disruptions from oil price shocks, while the other stems from U.S. market power in the world oil market. Our best assessment of the oil premium is $5/barrel (equivalent to 12 cents per gallon of gasoline), which would warrant a broad, though moderately scaled, tax on all uses of oil.

How Large Are the Welfare Costs of Tax Competition?

Palavras-chave: Energy security; Oil imports; Oil premium; Macroeconomic disruptions; Resource /Energy Economics and Policy; Q43; Q41; Q38.

Ano: 2003

URL: http://purl.umn.edu/10644

Previous literature has shown that competition among regional governments may lead to inefficiently low levels of capital taxation, because governments do not take account of the external benefits of capital flight to other regions. However, the fiscal distortion is smaller the more elastic the supply of capital (for the region bloc), if governments are not perfectly competitive, or they behave in part as a revenue-maximizing Leviathan. There has been very little empirical work on the magnitude of the welfare effects of fiscal competition. This paper presents extensive calculations of the welfare effects using a model that incorporates the possibility of Leviathan behavior, strategic behavior by governments, monopsony power in factor markets, and a wide...

How Large Are the Welfare Gains from Technological Innovation Induced by Environmental Policies?

Palavras-chave: Fiscal competition; Tax harmonization; Welfare costs; Leviathan; Strategic behavior; Public Economics; H73; H21; H23.

Ano: 2001

URL: http://purl.umn.edu/10848

Parry, Ian W.H.; Pizer, William A.; Fischer, Carolyn.

This paper examines whether the welfare gains from technological innovation that reduces future abatement costs are larger or smaller than the Pigouvian welfare gains from optimal pollution control. The relative welfare gains from innovation depend on three key factors ¾ the initially optimal level of abatement, the speed at which innovation reduces future abatement costs, and the discount rate. We calculate the welfare gains from innovation under a variety of different scenarios. Mostly they are less than the Pigouvian welfare gains. To be greater, innovation must reduce abatement costs substantially and quickly and the initially optimal abatement level must be fairly modest.

Tax Deductions, Consumption Distortions, and the Marginal Excess Burden of Taxation

Palavras-chave: Innovation; Welfare; Regulation; Endogenous; Technological; Change; R&D; Environmental Economics and Policy; Q16; Q28; O32; O33.

Ano: 2002

URL: http://purl.umn.edu/10448

Certain types of expenditure--e.g. mortgage interest and medical insurance- receive favorable tax treatment and are effectively subsidized relative to other (non-tax-favored) expenditures. Labor taxes (e.g. income taxes) can therefore produce efficiency losses by distorting the allocation of consumption, in addition to distorting the labor market. Using evidence on the responsiveness of taxable income to changes in tax rates, a seminal study by Feldstein (1999) estimates that the marginal excess burden of taxation (MEB) could exceed unity, when the effects of tax deductions are taken into account. This is several times larger than in previous studies of the MEB that focus exclusively on labor market effects. This paper develops a "disaggregated" approach...

Does Britain or the United States Have the Right Gasoline Tax?

Palavras-chave: Welfare costs; Tax system; Tax deductions; Simulations; Political Economy; H21; H43.

Ano: 1999

URL: http://purl.umn.edu/10801

Parry, Ian W.H.; Small, Kenneth A..

This paper develops an analytical framework for assessing the second-best optimal level of gasoline taxation taking into account unpriced pollution, congestion, and accident externalities, and interactions with the broader fiscal system. We provide calculations of the optimal taxes for the US and the UK under a wide variety of parameter scenarios, with the gasoline tax substituting for a distorting tax on labor income. Under our central parameter values, the second-best optimal gasoline tax is $1.01/gal for the US and $1.34/gal for the UK. These values are moderately sensitive to alternative parameter assumptions. The congestion externality is the largest component in both nations, and the higher optimal tax for the UK is due mainly to a higher assumed...

The Incidence of Pollution Control Policies

Palavras-chave: Gasoline tax; Pollution; Congestion; Accidents; Fiscal interactions; Public Economics; H21; H23; R48.

Ano: 2004

URL: http://purl.umn.edu/10461

Parry, Ian W.H.; Sigman, Hilary; Walls, Margaret; Williams, Roberton C., III.

This paper reviews theoretical and empirical literature on the household distribution of the costs and benefits of pollution control policies, and ways of integrating distributional issues into environmental cost-benefit analysis. Most studies find that policy costs fall disproportionately on poorer groups, though this is less pronounced when lifetime income is used, and policies affect prices of inputs used pervasively across the economy. The policy instrument itself is also critical; freely allocated emission permits may hurt the poor the most, as they transfer income to shareholders via scarcity rents created by higher prices, while emissions taxes offer opportunities for progressive revenue recycling. And although low-income households appear to bear a...

When Can Carbon Abatement Policies Increase Welfare? The Fundamental Role of Distorted Factor Markets

Palavras-chave: Distributional incidence; Emissions taxes; Tradable permits; Environmental benefits; Distributional weights; Environmental Economics and Policy; Q52; Q58; H22.

Ano: 2005

URL: http://purl.umn.edu/10651

Parry, Ian W.H.; Williams, Roberton C., III; Goulder, Lawrence H..

This paper employs analytical and numerical general equilibrium models to assess the efficiency impacts of two policies to reduce U.S. carbon emissions - a revenue-neutral carbon tax and a non-auctioned carbon quota - taking into account the interactions between these policies and pre-existing tax distortions in factor markets. We show that tax interactions significantly raise the costs of both policies relative to what they would be in a first-best setting. In addition, we show that these interactions put the carbon quota at a significant efficiency disadvantage relative to the carbon tax: for example, the costs of reducing emissions by 10 percent are more than three times as high under the carbon quota as under the carbon tax. This disadvantage reflects...

Are Emissions Permits Regressive?

Palavras-chave: Carbon tax; Carbon quota; Pre-existing taxes; Welfare effects; Environmental Economics and Policy; L51; H23; D52.

Ano: 1998

URL: http://purl.umn.edu/10514

Grandfathered emissions permits redistribute income to wealthy households by creating firm rents that ultimately accrue to shareholders. Consequently, they can be highly regressive, even if the poor do not have large budget shares for polluting goods. Using an analytical model, this paper estimates the burden borne by different income groups when emissions permits are used to control power plant emissions of carbon, SO2, and NOx. We also compare the burden borne by poor households under permits with that under emissions taxes, performance standards, technology mandates, and input taxes. And we show how the social costs of policies differ from efficiency costs when society has aversion to inequality.

Fiscal Interactions and the Costs of Controlling Pollution from Electricity

Palavras-chave: Equity effects; Pollution controls; Emissions permits; Social welfare function; Environmental Economics and Policy; Q28; H22; H23.

Ano: 2003

URL: http://purl.umn.edu/10523

This paper quantifies the costs of controlling SO2, carbon, and NOx emissions from power generation, accounting for interactions between environmental policies and the broader fiscal system. We distinguish a dirty technology (coal) that satisfies baseload demand and a clean technology (gas) that is used during peak periods, and we distinguish sectors with and without regulated prices. Estimated emissions control costs are substantially lower than in previous models of fiscal interactions that assume a single, constant returns technology and competitive pricing. The results are reasonably robust to alternative scenarios, such as full price deregulation and market power in the deregulated sector.

Is Pay-As-You-Drive Insurance a Better Way to Reduce Gasoline than Gasoline Taxes?

Palavras-chave: Electricity generation; Pollution control; Fiscal interventions; Price regulation; Multiple technology; Environmental Economics and Policy; Q28; H21; H23; L94.

Ano: 2004

URL: http://purl.umn.edu/10785

Gasoline taxes are widely perceived as the most efficient instrument for reducing gasoline consumption because they exploit all behavioral responses for reducing fuel use, including reduced driving and improved fuel economy. At present, however, higher fuel taxes are viewed as a political nonstarter. Pay-as-you-drive (PAYD) auto insurance, which involves replacing existing lump-sum premiums with premiums that vary in proportion to miles driven, should be more practical, since they do not raise driving costs for the average motorist. We show that when impacts on a broad range of motor vehicle externalities are considered, PAYD also induces significantly higher welfare gains than comparable gasoline tax increases, for fuel reductions below 9%. The reason is...