Economics, Econometrics and Finance
4 years ago

Carbon tax sparks shift to cleaner, job-rich industries in Germany

SSRN Electronic Journal
Environmental Taxation and Structural Change in an Open Economy A CGE Analysis with Imperfect Competition and Free Entry
Christoph Böhringer, Heinz Welsch, Andreas Löschel

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Environmental taxes can impact economies of scale in industries with imperfect competition and free entry. The number and size of firms change, affecting price elasticity of demand. In Germany, a carbon tax led to more structural change towards less energy-intensive industries under imperfect competition. Total costs of environmental regulation can vary depending on gains or losses in economies of scale across sectors.