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GTAP Resource #1752

"The impact of special provisions in the framework of energy taxes on the environmental effectiveness – The case of Germany"
by Kohlhaas, Michael and Stefan Bach

Many countries apply energy taxation to give an incentive to reduce energy use and energy-related emissions. Most of them grant special provisions to energy-intensive production in order to meet concerns about negative economic effects and to mitigate carbon leakage.
In Germany an “ecological tax reform” was introduced in 1999 increasing the taxes on petroleum products (gasoline, diesel fuel, heating oil and natural gas) and electricity. In return, statutory social security contributions were reduced by roughly the same amount as the extra energy tax revenue. Special provisions in the form of reduced tax rates and tax rebates were made for most commercial energy users. The goods and materials sector (i.e., manufacturing industry, energy/water, mining and construction sector) as well as agriculture, forestry and fishery paid only twenty percent of the regular eco-tax. Moreover, some enterprises were eligible for tax rebates. All eco-tax payments of an enterprise in the goods and materials sector which exceeded the savings of social security contributions by more than twenty percent were refunded.
In 2003, the tax law was revised in order to increase the incentive for energy and emission reduction for companies that profit from those tax privileges. Since then they have to pay 60 percent of the regular tax rates. Moreover, only 95 percent of the additional tax payment in excess of the savings of social security contributions will be reimbursed.
This paper analyses the effect of those changes on energy use and CO2 emissions. We argue that the increase of the marginal tax in combination with a “ceiling” of the tax rebates has an ambiguous effect on total emissions. While some energy users now face higher marginal tax rates, others have lower marginal rates. Therefore, we undertake a quantitative analysis with a recursive-dynamic CGE model of Germany and the EU, LEAN. Since tax reductions and rebates depend on company-specific data, the effective marginal (and average) tax rates differ by enterprise. For our analysis, they will be calculated based on the most detailed available (German) statistics on production, energy use and employment and aggregated to average marginal tax rates.

Resource Details (Export Citation) GTAP Keywords
Category: 2005 Conference Paper
Status: Published
By/In: Presented at the 8th Annual Conference on Global Economic Analysis, Lübeck, Germany
Date: 2005
Version: 0
Created: Kohlhaas, M. (5/1/2005)
Updated: Kohlhaas, M. (5/2/2005)
Visits: 1,786
No keywords have been specified.

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