Who Pays for the Pollution Fees? Cost Transmissions Along the Supply Chain

Ying Li (), Lei Li (), Zhi Su () and Libo Yin ()

CRC TR 224 Discussion Paper Series from University of Bonn and University of Mannheim, Germany

Abstract: This paper studies the propagation of environmental regulation along the supply chain and quantifies its welfare implications. By incorporating input-output linkages into the workhorse tax incidence model, we derive statistically sufficient representations of the incidence under a general imperfect competition framework. In the context of China’s SO2 emission regulation, we show that emission fees affect manufacturing producers through two channels. First, manufacturing producers bear the full brunt of emissions fees imposed directly on them. Second, emission fees imposed on their upstream suppliers translate into higher input costs faced by manufacturing producers, who bear 29% of the burden. Neglecting the role of the latter would result in an underestimation of 5%–13% of the cost burden for most industries.

Keywords: Input-Output-Linkage; Emission Fees; Incidence; Pass-Through (search for similar items in EconPapers)
JEL-codes: D57 H22 H23 L60 Q52 (search for similar items in EconPapers)
Pages: 53
Date: 2023-12
New Economics Papers: this item is included in nep-ene and nep-env
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.crctr224.de/research/discussion-papers/archive/dp483 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bon:boncrc:crctr224_2023_483

Access Statistics for this paper

More papers in CRC TR 224 Discussion Paper Series from University of Bonn and University of Mannheim, Germany Kaiserstr. 1, 53113 Bonn , Germany.
Bibliographic data for series maintained by CRC Office ().