Template-Type: ReDIF-Paper 1.0
Title: Energy Tax Exemptions and Industrial Production
Author-Name: Andreas Gerster
Author-Email: gerster@uni-mannheim.de
Author-Name: Stefan Lamp
Author-Email: slamp@eco.uc3m.es
Classification-JEL: D22, H23, L60, Q41
Keywords: Environmental Policy, Leakage, Energy Taxes, Manufacturing Industry

Abstract: Environmental policies are often accompanied by exemptions for energy-intensive
and trade-exposed industrial firms to avoid leakage from regulated to unregulated
jurisdictions. This paper investigates the impact of a large electricity tax exemption
on production levels, employment, and input choices in the German manufacturing
industry. For two different policy designs, we show that exempted plants significantly
increase their electricity use. This effect is considerably larger under a notched exemption policy,
where passing an eligibility threshold yields infra-marginal benefits,
compared to a revised policy where these benefits have been largely removed.
We detect no significant impact of the exemptions on production levels, export shares, and
employment. Using counterfactual simulations, we document substantial distortive
effects of notched exemption policies when financial stakes are high and compliance
cost for firms are low.

Note: 
Length: 79
Creation-Date: 2023-01
Revision-Date: 
File-URL: https://www.crctr224.de/research/discussion-papers/archive/dp388
File-Format: application/pdf
Handle: RePEc:bon:boncrc:CRCTR224_2023_388