Abstract:
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Environmental economics has proposed the taxation on energy as an effective way
to mitigate the pollution caused by the production and use of energy based on
fossil fuels. From a practical point of view, however, taxes on energy are thought to
have a detrimental impact on the economy that reduce competitiveness and
diminish economic welfare, especially if the tax burden is (completely or partially)
translated to final prices. This paper provides a method to analyse by how much
energy prices influence the price formation mechanism of an economy. The model
used, which captures the general equilibrium channels existing among energy
activities, the rest of the production system and households, is based on the
accounting identities reflected in a Social Accounting Matrix (SAM). The SAM price
model allows to identify the role of energy prices into the cost transmission and
the price definition process. The empirical application, which is for the Catalan
economy, shows a considerable influence of energy prices on both production and
final prices. The results also show that the different forms of energy exert
asymmetric impacts on the costs of sectors and consumers.
Keywords: energy prices, cost linkages, price transmission, social accounting
matrix.
JEL Classification: C69. D58. Q41. |