An Empirical Assessment of the Effectiveness of Green Policies

Our empirical analysis covers a subset of the OECD-countries for the years 1978-2010. With this data we make two major contributions existing literature on esti-mating oil demand functions: First, we identify the effect of green policy measures on the demand for oil. This was not yet done in any empirical study in this com-prehensive way. Second, we do this on an international scale. We follow the empirical strategy of Davis and Kilian (2011) who compare different econometric methods and argue in favor of an instrumental variable approach for estimating the effect of a gasoline tax on carbon emissions in the United States. Similarly we estimate tax elasticities of oil demand for our multi-country sample. Thereby our approach differs from other studies which estimate the price elasticities only. We find that the argument of a pigouvian tax can be supported and that the in-fluence of taxes and subsidies differ substantially between the analyzed countries. Our analysis emphasizes that green policy measures are increasingly used in many countries. Usually they are justified by the idea to reduce climate change. Our paper contributes to answering the question of how well this aim is being achieved and to which extent carbon taxes simply raise revenues