Template-Type: ReDIF-Paper 1.0
Title: Who Pays for the Pollution Fees? Cost Transmissions Along the Supply Chain
Author-Name: Ying Li
Author-Email: yingliallen@163.com
Author-Name: Lei Li
Author-Email: lei.li@uni-mannheim.de
Author-Name: Zhi Su
Author-Email: suzhi1218@163.com
Author-Name: Libo Yin
Author-Email: yinlibowsxbb@126.com
Classification-JEL: H22, H23, Q52, D57, L60
Keywords: Input-Output-Linkage, Emission Fees, Incidence, Pass-Through

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.

Note: 
Length: 53
Creation-Date: 2023-12
Revision-Date:
File-URL: https://www.crctr224.de/research/discussion-papers/archive/dp483
File-Format: application/pdf
Handle: RePEc:bon:boncrc:CRCTR224_2023_483