Capros P., P. Karadeloglou and G. Mentzas (1991) "Fiscal Policy Analysis for CO2 Emission Reduction in Europe: Quantitative Analysis with the MIDAS model"
Paper presented at the IIASA International Energy Workshop, 18-20 June, Laxenburg, Austria.
The emission of greenhouse gases, especially CO2, has become one of the most pressing environmental problems world-wide, since it induces a global climate change. The imposition of taxes to internalise the external costs associated with CO2 emissions is economically a natural way to proceed.
The present paper quantifies the energy system implications of CO2-related taxes and evaluates their efficiency in CO2 emission reduction. The paper compares two systems of taxation, namely the carbon versus the energy tax. The analysis refers to a short/medium horizon (1995 to 2005) and is partial equilibrium, since it focuses on the energy sector only; in addition it is a single-country analysis, although the study is made for four major European countries, namely UK, Italy, Germany and France; finally it follows a top-down approach since the response of the energy demand sectors to the CO2 taxes is simulated by means of econometric equations.
The analysis is based on results of the MIDAS energy model. This is a large-scale model, which covers all energy demand and supply sectors and computes the set of energy prices and the energy balance. Econometric behavioural equations are estimating energy demand, while process analysis and cost evaluation techniques are used for the formulation of the behaviour of the energy supply sectors. Energy prices, mainly depending on the supply side, influence energy demand and constitute the main convergence variable of the model. The model runs dynamically at an annual basis.
In order to compare the energy to the carbon tax, we examine alternative policy scenarios, evaluate their numerical results and draw policy conclusions.
Paper available on request (hard copy only)
