Taxes in CBA. Illustrations with special reference to the Swedish - - PowerPoint PPT Presentation

Taxes in CBA.

Illustrations with special reference to the Swedish Green Certificate Scheme. Per-Olov Johansson Stockholm School of Economics per-olov.johansson@hhs.se

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Financial support from the research programs EFORIS and FRAM-KLIV are gratefully acknowledged.

Agenda.

 Taxes in partial equilibrium versus general equilibrium.

 A tax on effect.

 Illustration: Green certificates.

 Introduction.

 A marginal change in the scheme.  Scrapping the scheme.  Concluding remarks.

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• Tax. Partial equilibrium versus general

equilibrium.

 Partial: Redistribution  Firm: (p – t – mc).  Social: (p – mc).  Social: (p – mc + tx)  General equilibrium, something extra

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Another case.

p mc GWh EUR Uncertainty. Political: pq > mcq + E(t). Price: E(p)q > mcq + tax.

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t

1 2 1 2

( ) ( ) ( ) ( ) V p q mc q t F V p q mc q t F V F p q mc q E t                      

Green certificates and taxes.

2016 0.231 2021 0.272 2026 0.183 2031 0.094 2017 0.247 2022 0.257 2027 0.162 2032 0.076 2018 0.27 2023 0.244 2028 0.146 2033 0.052 2019 0.291 2024 0.227 2029 0.13 2034 0.028 2020 0.288 2025 0.206 2030 0.114 2035 0.013

( ) , ( , )

G s c f

p p e p T e y      

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A small increase in the quota.

• 0.16901090.01

α = + 1%: Loss  SEK 170 m; NPV20 2.5-3 bn.  = -0.7  2.3.

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90 10 0.3 0.002 1.0337 e     

(.) ( )

f

e c p

 

 

[ ] ( ) .

c N c s c d m y

V p e d dT p e d t p p t p t de V                         

dTN = [0.23 + (0.25 + 0.2310.16 + 0.23 + 0.3)0.25]de

e  -52.2106

Scrapping the certificates.

e(.) pf ps αpc(1+tm) pR e0 e1 kWh

CS + y + T SEK bn: 4.2 – 3.3 – 0.32  0.544

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NPV20 7– 8 bn.  -0.7  2.3 EUR

1 1 1

( , ) ( , ),

f f

V y T CV V y T         p p

19 19

(.) [ ] , 2

p H f G t t t p f f G t t t t t

CV e dp T p e e p T  

 

                

  

Caveats…PE

 Increased production causes emissions.

 But not of CO2; EU ETS.

 Ecosense: SEK 35 m; SEK 0 – 55 m.

 The estimate is based on Ecosense LE's default values for emissions caused by a hard coal (IGCC) 450 MW plant of NOx, SO2, PM10, PM25, NMVOC, and NH3.

 VAT-losses in the rest of the economy.

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P1 P1 + tm X SEK

 Correlated prices; market power; investment in new plants…  …but hopefully a first small evaluation step…Not very demanding in terms of time and financial resources.

 Second-best problem.  Compare deregulation of polluting monopoly.

Next step?

 Using a numerical model and a CGE to estimate the outcome.

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 WP at the SSE and/or CERE (Böhringer, Johansson and Kriström): On the Evaluation of Green Certificates. The Case of Sweden.