Chapter

Is Environmental Tax Reform an Appropriate Policy for Industrial Sectors with Different Energy Intensities? An Analysis of UK Industrial Sectors

Paolo Agnolucci

in Environmental Tax Reform (ETR)

Published in print April 2011 | ISBN: 9780199584505
Published online May 2011 | e-ISBN: 9780191725012 | DOI: http://dx.doi.org/10.1093/acprof:oso/9780199584505.003.0004

Series: Creating Sustainable Growth In Europe

Is Environmental Tax Reform an Appropriate Policy for Industrial Sectors with Different Energy Intensities? An Analysis of UK Industrial Sectors

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Energy intensities of industrial subsectors differ widely due to differences in the final product and ultimately in the production process. The aim of this chapter is to assess whether these differences are stochastic or deterministic. The analysis is implemented for a number of UK industrial subsectors over the 1970–2004 and 1978–2004 time periods. This chapter uses recent advances in univariate and panel unit root tests. It turns out that the results of the tests are very influenced by whether one allows for the presence of deterministic structural breaks. Only when modelling structural breaks, can one conclude that the evidence in favour of the long-term differences being deterministic outbalances the evidence pointing at their nature being stochastic. This supports the adoption of policy instruments, such as environmental taxation, which are applied across productive sectors in a way which is not affected by the short-run evolution of the sectors.

Keywords: environmental tax reform; environmental taxation; productive sectors; structural breaks; industrial sectors

Chapter.  4846 words.  Illustrated.

Subjects: Macroeconomics and Monetary Economics

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