The extent to which environmental taxation affects emission: an empirical investigation of sulphur dioxide tax in European countries
1999
Cule, M.
The optimization behaviour of the firm in the competitive market which intends to maximize profits and of the social planner which tries to maximize social welfare provide this research with the framework to derive the emission function. This model of emission employs three important factors; regulator, market and technology. We have examined how the environmental taxation rate as a regulator instrument, output price and wage (input price) representing markets and capital standing for technology affect emission. The tax potency is of a special interest. Partial elasticities of emission are also studied. The model is calibrated using data for manufacturing industries in European countries for the period 1990-1997. The SO2 tax is examined in particular and the Pooled Least Squares method of estimation is used. It was concluded that environmental taxation and capital, negatively affect emission whereas wage and, to a lesser degree price have positive effect on it. Emission was to found to be inelastic to tax, price, wage and capital
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