NANCY Seminar – Etienne LORANG (BETA, Université de Strasbourg)

Event details :

Title: Source taxes versus end-of-chain taxes in general equilibrium, co-written with Reyer GERLAGH, Aude POMMERET and Antonin POTTIER

Abstract: We propose a general equilibrium model to analyze the taxation of an externality, where only the aggregate amount matters. In this common situation, regulation is traditionally considered upstream at the source of the externality. We rigorously define regulation downstream at the end-of-chain, through taxation of the embodied externality, as in the case of greenhouse gas emissions footprinting. We identify conditions for equivalence between source-based and end-of-chain taxes. We show that implementation via end-of-chain taxes requires the existence of equilibrium price schedules under which goods are traded as bundles of quantities and embodied externalities. Our results characterize the informational and pricing structures required, and provide a unified general equilibrium framework for the analysis of environmental policies.