Trade neutrality of national environmental policy : some theoretical considerations and simulation results for Switzerland

According to the traditional theory, for energy taxes uniform rates across sectors are optimal. But wherever attempts are made to "green" the tax system at least some sectors are treated differently. Exemption regulations for energy-intensive sectors are not the only but perhaps the only practical way to reach trade-neutrality of an ecological tax reform. Besides the influence of political pressure groups and the traditional leakage argument there might be a politico-economic argument which calls for different tax rates in different sectors. Using an applied general equilibrium model of the Swiss economy it is shown that at least for this country such exemptions have no important impacts, neither economically nor environmentally.