Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/145038
Authors: 
Sen, Suphi
Vollebergh, Herman R. J.
Year of Publication: 
2016
Series/Report no.: 
CESifo Working Paper 6003
Abstract: 
We estimate the long-run effect of a uniform carbon tax on energy consumption by using a new and unique dataset in which effective tax rates of OECD countries are calculated in terms of carbon dioxide emissions. The effective tax rates account for the widely discussed tax deductions for specific energy tax bases leading to a careful calculation of net tax rates faced by agents. We argue that taxation might be endogenous to energy consumption in the long run. In order to identify a causal effect, we document a positive correlation between the tax rates of neighboring countries which we then exploit in our instrumental variables estimations. Validity of our identification strategy is consistent with the strategic inter-governmental interaction theo-ries that lead to a spatial pattern in local government policies in the presence of immobile tax bases. Our instrumental variables estimations indicate that taxing carbon content of energy use can be an effective instrument for climate policy.
Subjects: 
effective tax rates
energy taxation
energy consumption
carbon-dioxide emissions
IV estimation
JEL: 
Q41
Q48
H23
C26
Document Type: 
Working Paper

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