Presents the paper "Tax Deductions, Environmental Policy, and the "Double Dividend" Hypothesis," written by Ian Parry and Antonio Bento in May 1999 for the World Bank. The authors find that incorporating tax-favored consumption in models of environmental tax swaps may overturn key results from earlier studies.

Recent studies find that environmental tax swaps typically exacerbate the costs of the tax system and therefore do not produce a "double dividend". We extend previous models by incorporating tax-favored consumption goods (e.g. housing, medical care). The efficiency gains from recycling environmental tax revenues are therefore larger because pre-existing income taxes distort both consumption decisions and factor markets. In this setting a revenue-neutral emissions tax (or auctioned permits) produces a double dividend. Moreover, the overall costs of environmental tax swaps are negative, for modest emissions reductions. The efficiency gains from emissions taxes over grandfathered permits are also much larger than previously recognized.

Recent studies find that environmental tax swaps typically exacerbate the costs of the tax system and therefore do not produce a double dividend. This paper extends previous models by incorporating tax-favored consumption goods. In this setting, the efficiency gains from recycling environmental tax revenues are larger because preexisting taxes distort the consumption bundle, in addition to factor markets. A genuine double dividend is then found.Parry and Bento find that incorporating tax-favored consumption in models of environmental tax swaps may overturn key results from earlier studies. In particular, a revenue-neutral pollution tax (or auctioned permits) can produce a substantial double dividend by reducing both pollution and the costs of the tax system. The second dividend arises because the welfare gain from using environmental tax revenues to cut labor taxes is much larger when labor taxes also distort the choice among consumption goods. Indeed (ignoring environmental benefits), the overall costs of a revenue - neutral pollution tax are negative in the benchmark simulations, at least for pollution reductions up to 17 percent, and possibly up to 42 percent.In addition, Parry and Bento show that the presence of tax-favored consumption may drastically increase the efficiency gain from using (revenue-neutral) emissions taxes (or auctioned emissions permits) rather than grandfathered emissions permits.This paper - a product of Infrastructure and Environment, Development Research Group - is part of a larger effort in the group to study regulatory policies in a second-best setting. The authors may be contacted at [email protected] or [email protected].

A comprehensive analysis of an environmental tax reform where people are taxed on pollution and the use of natural resources instead of on their income, this book looks at the challenges involved in implementing this tax reform across Europe.

This open access book evaluates, from an economic perspective, various measures introduced in Japan to prevent climate change. Although various countries have implemented such policies in response to the pressing issue of climate change, the effectiveness of those programs has not been sufficiently compared. In particular, policy evaluations in the Asian region are far behind those in North America and Europe due to data limitations and political reasons. The first part of the book summarizes measures in different sectors in Japan to prevent climate change, such as emissions trading and carbon tax, and assesses their impact. The second part shows how those policies have changed the behavior of firms and households. In addition, it presents macro-economic simulations that consider the potential of renewable energy. Lastly, based on these comprehensive assessments, it compares the effectiveness of measures to prevent climate change in Japan and Western countries. Providing valuable insights, this book will appeal to both academic researchers and policymakers seeking cost-effective measures against climate change.

The double-dividend hypothesis' suggests that increased taxes on polluting activities can provide two kinds of benefits. The first is an improvement in the environment, and the second is an improvement in economic efficiency from the use of environmental tax revenues to reduce other taxes such as income taxes that distort labor supply and saving decisions. In this paper, we make four main points. First, the validity of the double-dividend hypothesis cannot logically be settled as a general matter. Second, the focus on revenue in this literature is misplaced. We demonstrate that three policies have equivalent impacts on the environment and on labor supply. One of those policies raises revenue from the environmental component of the reform, another loses revenue, and a third has no revenue associated with it. Third, what matters is the creation of privately-held scarcity rents. Policies that raise product prices through some restriction on behavior may create scarcity rents. Unless those rents are captured by the government, such policies are less efficient at ameliorating an environmental problem than are policies that do not create rents. Finally, we distinguish between two types of command and control regulations on the basis of whether they create scarcity rents.

Better designed and implemented fiscal regimes for oil, gas, and mining can make a substantial contribution to the revenue needs of many developing countries while ensuring an attractive return for investors, according to a new policy paper from the International Monetary Fund. Revenues from extractive industries (EIs) have major macroeconomic implications. The EIs account for over half of government revenues in many petroleum-rich countries, and for over 20 percent in mining countries. About one-third of IMF member countries find (or could find) resource revenues “macro-critical” – especially with large numbers of recent new discoveries and planned oil, gas, and mining developments. IMF policy advice and technical assistance in the field has massively expanded in recent years – driven by demand from member countries and supported by increased donor finance. The paper sets out the analytical framework underpinning, and key elements of, the country-specific advice given. Also available in Arabic: ????? ??????? ?????? ???????? ???????????: ??????? ???????? Also available in French: Régimes fiscaux des industries extractives: conception et application Also available in Spanish: Regímenes fiscales de las industrias extractivas: Diseño y aplicación

This report draws on case studies to explore the relationship between environmentally-related taxation and innovation to see whether taxation can spur innovation and if so, what types.

This report analyses current use of environmentally related taxes in OECD Member countries. Focus is given to their environmental effectiveness. The report identifies obstacles to a broader use of such taxes -- in particular the fear of loss of sectoral competitiveness -- and ways to overcome them.