This presentation was made by Nils Axel Braathen, OECD, at the Introductory Workshop on Green Budgeting Tools held at the OECD, Paris, on 29 April 2019

1. Ex-post cost-benefit analysis of environmentally
related tax policies
Paris Collaborative on Green Budgeting
2nd Green Budgeting Experts Meeting
29 April 2019, OECD Conference Centre, Paris
Jonas Teusch, OECD
Centre for Tax Policy and Administration
Environment Directorate

2. 1. Several studies identify causal effects of environmentally related tax
policies on health and environmental outcomes (e.g. CO2 emissions).
However: quantified effects are typically a small subset of total impacts.
2. Regulatory impact assessments do not always simultaneously quantify
costs and benefits
Cost-benefit analysis (CBA) can provide decision makers with more
complete assessments, including side effects (e.g. local pollution), which
may lead to:
– Improvements to evaluated policy;
– Better complementary policies (e.g. congestion charging).
2
Motivation

3. Long-term objective: How can more environmentally related tax policies
undergo ex-post CBA?
Immediate objective: How can ex-post CBA effectively build on existing
evidence of the effects environmentally related tax policies?
Audience:
– policy analysts
– academic researchers
3
Objectives

4. «Inductive» method: Guidance developed by reference to French feebate
programme for motor vehicles introduced in 2008 (analysis for first year
only – no general assessment of French feebate policy).
Starting point: Short-run (quarterly) effects of French bonus/malus on
CO2 emissions in 2008 (D'Haultfœuille, Givord and Boutin, 2014).
Taking a CBA perspective: What’s missing in original analysis?
– Lifetime vehicle usage;
– Non-climate externalities such as congestion and local air pollution;
– Indirect fiscal impacts (excise and VAT);
– Implications for consumers and producers. 4
Approach

5. 5
1. Climate impacts of 2008 feebate
-1 200
-1 000
- 800
- 600
- 400
- 200
0
200
400
-12
-10
-8
-6
-4
-2
0
2
4
Fleet composition Rebound Fleet size Manufacturing
EUR milliont CO2 million
Thousands
Climate effect (left axis) Climate cost (right axis)

6. Even ex-post CBA involves forward-looking assumptions about future
impacts of the changes triggered by the policy beyond the programme
evaluation period.
The consideration of benefits that accrue after the end of the
programme evaluation period can fundamentally alter results. Ex-post
appraisals that are building on programme evaluation studies should
discuss the magnitude and reason for these differences.
6
Recommendations (I)

7. 7
2. Non-climate externalities of 2008 feebate
0
500
1 000
1 500
2 000
2 500
Air pollution Congestion Accidents Noise Wear & tear
EUR million
Petrol Diesel

8. CBA should not be limited to considering climate externalities, but should
include all relevant externalities.
If the social costs and benefits of quantified effects are uncertain, it can
be prudent to apply a reasonable range
8
Recommendations (II)

9. 9
3. Fiscal impacts and their social cost
-2 500
-2 000
-1 500
-1 000
- 500
0
500
Feebate Excise tax VAT
Fiscal impact Social impact

10. Fiscal effects going beyond the analysed environmentally related tax policy
should be considered as well.
The application of a tax provision that reduces net public revenues causes a
social cost per unit of revenue foregone that is equal to the marginal cost
of public funds of the instrument used to raise the necessary additional
revenue. Fiscal costs should be corrected accordingly.
10
Recommendations (III)

11. 11
4. Surplus impacts of first year of feebate
0
200
400
600
800
1 000
1 200
1 400
Consumer surplus Domestic producer surplus Foreign producer surplus
EUR million
Surplus impact

12. Do not solely assess externalities and fiscal effects, but consider changes
in consumer and producer surplus as well.
As the distribution of costs and benefits can be of great interest – for the
people involved and from a political perspective – case studies should at
least qualitatively discuss distributional impacts.
12
Recommendations (IV)

13. 13
Comparison of social costs and benefits
-7 000
-6 000
-5 000
-4 000
-3 000
-2 000
-1 000
0
1 000
2 000
Climate Non-climate Fiscal Consumers Producers Net benefit
EUR million
Social impact

14. Programme evaluation studies provide valuable information on the
intended effects of a policy.
However, comprehensive ex-post appraisal requires consideration of
unintended effects as well.
CBA is a powerful framework to complement programme evaluation
studies accordingly.
Interesting insights from existing evidence.
Notes of caution: Unquantified / unquantifiable impacts can equally affect
results (development of cleaner cars) 14
Conclusions

15. Ex-post cost-benefit analysis of environmentally
related tax policies
Jonas Teusch, jonas.teusch@oecd.org