Implementing environmental taxes on intemediate goods in open economies
Name
35719457.pdf
Size
1.19 MB
Format
Adobe PDF
Checksum (MD5)
6f7f3796b6b874a91282e35a545b5b2a
Author(s)
Poterba, James M.
Rotemberg, Julio
Date Issued
1994
Publisher
MIT Center for Energy and Environmental Policy Research
Series/Report no.
MIT-CEEPR (Series) ; 94-006WP.
Abstract
Many proposed and actual environmental taxes are taxes on intermediate goods. These goods, such as fossil fuels, are typically tradable, and they are also used in the production of many tradable final goods. How should imports of intermediate and final goods be taxed if the government does not want environmental tax policy to alter the competitive positions of domestic and foreign producers? Not surprisingly, imports of the intermediate goods itself can be taxed at the same rate as domestic intermediate goods. Imports of final goods that are produced using these intermediate goods can be taxed based on their intermediate good intensity, provided there is no joint production. Under conditions of joint production, however, such as those that characterize the petroleum refining and petrochemical industries, it is difficult to define the intermediate goods intensity of any single product. Arbitrary assignments of intermediate good content, for example on the basis of output weight or value, are unlikely to preserve the competitive positions of domestic and foreign producers.
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