Avoiding adverse employment effects from electricity taxation in Norway: What does it cost? |
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Authors: | Geir H Bjertnæs |
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Affiliation: | Statistics Norway, Research Department, PO Box 8131 DEP, 0033 Oslo, Norway |
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Abstract: | Welfare analyses of energy taxes typically show that systems with uniform rates perform better than differentiated systems. However, most western countries include some exemptions for their energy-intensive export industries and thereby avoid this potential welfare gain. Böhringer and Rutherford (1997) find that uniform taxation of carbon emissions in combination with a wage subsidy preserves jobs in these industries at a lower welfare cost compared with a differentiated system. The wage subsidy scheme generates a substantial welfare gain per job saved. This study, however, finds that welfare costs are substantial when less accurate policy measures, represented by production-dependent subsidies, protect jobs in Norwegian electricity-intensive industries. The welfare cost per job preserved by this subsidy scheme amounts to approximately 60% of the wage cost per job, suggesting that these jobs are expensive to preserve. A uniform electricity tax combined with production-dependent subsidies preserves jobs at a lower welfare cost compared with the current differentiated electricity tax system. |
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Keywords: | Energy taxes Political feasibility CGE models |
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