Europe > Denmark

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  • Taxation and Subsidies: Externalities; Redistributive Effects; Environmental Taxes and Subsidies x
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Nicoletta Batini, Ian W.H. Parry, and Mr. Philippe Wingender
Denmark has a highly ambitious goal of reducing greenhouse gas emissions 70 percent below 1990 levels by 2030. While there is general agreement that carbon pricing should be the centerpiece of Denmark’s mitigation strategy, pricing needs to be effective, address equity and leakage concerns, and be reinforced by additional measures at the sectoral level. The strategy Denmark develops can be a good prototype for others to follow. This paper discusses mechanisms to scale up domestic carbon pricing, compensate households, and possibly combine pricing with a border carbon adjustment. It also recommends the use of revenue-neutral feebate schemes to strengthen mitigation incentives, particularly for transportation and agriculture, fisheries and forestry, though these schemes could also be applied more widely.
Mr. David Coady, Devin D'Angelo, and Brooks Evans
Fiscal policy is a key tool for achieving distributional objectives in advanced economies. This paper embeds the discussion of fiscal redistribution within the standard social welfare framework, which lends itself to a transparent and practical evaluation of the extent and determinants of fiscal redistribution. Differences in fiscal redistribution are decomposed into differences in the magnitude of transfers (fiscal effort) and in the progressivity of transfers (fiscal progressivity). Fiscal progressivity is further decomposed into differences in the distribution of transfers across income groups (targeting performance) and in the social welfare returns to targeting due to varying initial levels of income inequality (targeting returns). This decomposition provides a clear distinction between the concepts of progressivity and targeting, and clarifies the relationship between them. For illustrative purposes, the framework is applied to data for 28 EU countries to determine the factors explaining differences in their fiscal redistribution and to discuss patterns in fiscal redistribution highlighted in the literature.
Ms. Valerie Reppelin and Mr. John Norregaard


Explores different ways of controlling pollution through -green-taxes or permits, and evaluates their advantages and disadvantages. While many countries use environmental taxes, interest in tradable permits is growing.

Mr. John Norregaard and Ms. Valerie Reppelin
This paper examines the relative merits of two dominant economic instruments for reducing pollution—”green” taxes and tradable permits. Theoretically, the two instruments share many similarities, and on balance, neither seems preferable to the other. In practice, however, most countries have relied more on taxes than on permits to control pollution. The analysis suggests a number of lessons to be learned from country experiences regarding the design and implementation of both instruments. While many, particularly European countries, currently have long-term programs involving environmental taxes, a willingness to experiment with tradable permits seems to be growing, especially given the Kyoto protocol emission targets.