contain certain materials. The consumers of these products, which may be either production sectors
or household groups, are subjected to the levy see arrows labelled 3 in Fig. 2. The goal of this
policy is to encourage consumers to switch to other products with a lower metal content. The
main difference with the regulatory material levies is that the products themselves are levied, not
their material content. In this scenario the relative tax weights are equal across all sectors. The total
tax paid by a sector depends on the value of the products bought from the first stage production
sectors.
3
.
4
. Application to hea6y metals In the scenario analysis the material policies
will be simulated for two specific heavy metals: zinc and lead. Table 1 presents the direct and
compounded zinc and lead intensities for selected production sectors. The compounded material in-
tensity is calculated for a ‘first-stage compound’, i.e. the first-stage production sectors are excluded
and the implicit material content of the products from these first stage production sectors are taken
into account in the material intensities of the other sectors. For illustrative purposes, the share
in the total inflow of a particular metal is pre- sented measured as a percentage of the use in
kilograms.
Table 1 shows that the share of the basic metal industry in the total inflow of zinc is more than
80 of the total zinc use. Other large users of zinc are the basic chemical industry, metal products
manufacturing and wholesale and retail trade through imports. The lead use of the basic metal
industry is 46 of total lead use. Among the sectors with high lead intensity is the
construction sector. At first glance, the large zinc and lead intensity of the other services sector may
seem surprising. However, this sector encom- passes the waste-handling firms that account
for a large use of metals Boelens and Olsthoorn, 1998.
A high low direct metal input of a production sector does not necessarily imply a high low
compounded metal intensity of the goods and services produced in the sector. The reported di-
rect intensities are based on where the metals enter the economic process. For example, a final
stage production sector may produce goods and services with a high compounded metal content,
but add a little more metal in the production process itself. The materials included in the eco-
nomic inputs are already accounted for in other production stages. The differences between the
compounded and direct material intensities indi- cate where most of the materials from the basic
metal industry goes the throughput from this sector.
4. Results of the scenario analysis
The results of the policies in the various scenar- ios are discussed for the production sectors, the
household groups, employment and trade. The following policies as described in Section 3 are
simulated:
1. A regulatory levy on the primary use of zinc zinc inflow levy.
2. A regulatory levy on the throughput of zinc zinc throughput levy.
3. A regulatory levy on products that contain zinc zinc product levy.
4. A regulatory levy on the primary use of lead lead inflow levy.
5. A regulatory levy on the primary use of both zinc and lead zinc and lead inflow levy.
In each of the first three scenarios, a levy is imposed on the use of zinc at different phases in
order to analyse the difference between the effects of an input, a throughput or a product
levy. The last two scenarios are simulated to examine the differences in results for different
materials.
The results of the scenario analyses are pre- sented as percentage changes from the initial equi-
librium real quantity changes. Tables 2 – 4 give the main results of the scenarios for selected pro-
duction sectors, household groups, employment and trade.
6
6
Detailed results can be found in Kandelaars and Dellink 1997.
R .B
. Dellink
, P
.P .A
.A .H
. Kandelaars
Ecological Economics
33 2000
205 –
218
Table 1 Metal intensities of selected production sectors
Zinc Production sector
Lead Direct intensity
Compounded intensity Direct intensity
Share in use Share in use
Compounded intensity kgguilder
kgguilder kgguilder
kgguilder 0.00
0.0 0.00
Agriculture 0.2
0.01 0.01
0.00 0.3
0.0 0.06
0.00 0.06
Grain mills 0.02
0.01 0.2
0.02 0.1
0.01 Petroleum
refineries 0.47
0.31 6.5
0.31 Basic chemical
0.44 6.3
industry 0.00
4.78 46.0
0.00 Basic metal
81.4 12.30
industry 13.8
1.12 1.08
1.39 Fabricated metal
3.7 0.42
products 0.03
0.1 0.02
0.1 0.03
Electricity supply 0.02
0.04 6.8
0.82 0.8
0.69 Construction
0.24 24.1
0.60 0.60
0.20 Wholesale and
5.7 0.20
retail trade 0.03
0.4 0.56
Other transport 0.00
0.0 0.00
0.00 Civil government
0.1 0.00
0.00 0.0
0.00 Other services
0.42 0.44
1.4 0.44
0.42 2.0
Table 2 Model results for selected production sectors; real output change
Production sector Zinc inflow
Zinc through Zinc and lead inflow levy
Zinc product Lead inflow
levy levy
levy levy
0.08 0.02
0.04 0.02
Agriculture 0.01
1.17 0.49
0.43 0.42
Tobacco industry 0.42
0.18 Petroleum refineries
0.32 0.25
0.12 0.16
− 0.09
Basic chemical industry −
0.79 0.46
− 0.13
− 0.10
− 5.31
− 13.15
− 10.51
− 7.01
Basic metal industry −
9.24 Fabricated metal products
− 0.56
− 2.28
− 0.54
− 0.95
− 0.71
− 0.47
− 0.55
− 0.46
− 0.37
Electricity supply −
0.43 −
1.81 −
0.01 Construction
− 0.33
− 0.01
− 0.13
− 0.09
− 0.07
− 0.10
− 0.29
Wholesale and retail trade −
0.17 0.09
0.07 0.05
0.05 Insurance
0.06 0.29
0.13 0.15
0.13 0.12
Civil government
4
.
1
. Scenario
1:
zinc inflow le6y For most production sectors the effects of the
regulatory metal levy are small, because most products and services have only a small direct
metal intensity see Table 1 and the off-setting reduction in labour taxes has no major impact on
the competitive position of the sectors. However, the regulatory levy on the primary use of zinc has
a considerable impact on the basic metal industry: Table 2 shows that the real output level of this
sector decreases with 10.5. This is not surpris-
Table 3 Model results for selected household groups; real income change
Lead inflow Zinc inflow
Household group Zinc and lead
Zinc product Zinc through
levy inflow levy
levy levy
levy 0.16
0.19 0.15
0.41 0.14
Public sector 0.10
0.07 0.09
− 0.08
0.11 Labour income; one person; 1st income
quartile 0.08
0.10 −
0.23 0.08
0.04 Labour income; one person; 2nd income
quartile 0.01
0.04 0.05
Labour income; one person; 3rd income −
0.27 0.03
quartile 0.02
0.03 −
0.32 0.02
− 0.01
Labour income; one person; 4th income quartile
Labour income; more persons; no chil- 0.07
0.04 0.08
− 0.18
0.09 dren; 2nd income quartile
− 0.15
0.10 0.08
0.08 Labour income; more persons; with chil-
0.05 dren; 2nd inc. quartile
0.19 0.22
0.30 Self-employed; services
0.12 0.24
− 0.03
− 0.05
− 0.13
− 0.04
Pensioners; one person; 2nd income −
0.03 quartile
− 0.01
− 0.02
− 0.02
Pensioners; more persons; 2nd income −
0.01 −
0.07 quartile
0.02 −
0.03 0.01
0.02 0.01
Transfer recipients; one person; 2nd in- come quartile
Transfer recipients; more persons; 2nd 0.01
− 0.03
0.01 −
0.00 0.01
income quartile
Table 4 Selected model results for employment and trade quantity changes
a
Lead inflow Zinc through
Primary inputs Zinc product
Zinc inflow Zinc and lead inflow levy
levy levy
levy levy
− 0.48
− 0.17
Total production −
0.20 −
0.16 −
0.17 Low-paid labour supply
− 0.003
− 0.003
− 0.003
− 0.003
− 0.003
Medium-paid labour sup- −
0.004 −
0.007 −
0.004 −
0.004 −
0.004 ply
− 0.008
− 0.014
High-paid labour supply −
0.007 −
0.014 −
0.011 Competitive imports
− 0.58
− 0.94
− 0.66
− 0.52
− 0.56
Exports −
0.09 0.06
− 0.10
− 0.05
− 0.08
− 4.47
− 10.70
− 8.58
Total use of zinc −
7.56 Total use of lead
− 3.46
− 4.41
a
The competitive imports do not include the import of crude petroleum and natural gas. Exports are the demand by the ‘rest of the World’.
ing, as the basic metal industry accounts for over 80 of the total primary use of zinc see Table 1.
If the basic metal industry could transfer part of the tax burden to other sectors through a
higher price for its products, the impact may be mitigated. This tax burden transfer depends on
the price elasticities, especially for basic metal industry goods. A small value for these elasticities
would imply that these sectors would still demand the metal goods, even if the price of these goods
rises. In the model, these price elasticities are calculated within the model from the nesting
structure of the production functions and the substitution elasticities. It may be concluded that
the basic metal industry has only limited opportu- nities to transfer the tax to its buyers. This is
consistent with the empirical observation that in- ternational competition in this sector is severe.
In general, the effects of the zinc inflow levy on real household income are small see Table 3,
mostly less than one-tenth of a percent. The posi- tive impact is only significant around 0.25 of
their net income for the self-employed: both the partial effects of the metal tax and the labour
subsidy are positive for these groups. For most households the effects of the metal tax and the
labour subsidy roughly balance each other. Given the redistribution of the tax revenues as a labour
subsidy the labour income households and the self-employed can improve more on their real
income than the ‘non-workers’, i.e. the pensioners and the transfer recipients.
Total production decreases, indicating that the zinc inflow levy is not without economic costs.
However, these costs are small: − 0.16 see Table 4. This decrease can entirely be contributed
to the decrease in output of the basic metal industry.
Table 4 shows that the demand for labour decreases very slightly in the zinc inflow levy,
indicating that there is no double dividend. One can also conclude that the material policy does
not negatively affect employment. This is in line with other empirical observations that the em-
ployment effects of environmental policy are in general negligable, at least within an applied gen-
eral equilibrium framework see, for example, Dellink and Jansen, 1995.
The labour tax reform has a positive effect on the import of primary inputs, but the zinc levy
off-sets this. Imports decrease, while exports the demand by the ‘Rest of the world’ are affected
slightly negatively see Table 4. Thus, the effects on the trade balance are small and inconclusive.
Using the ‘rough’ measure for the effects on materials see Section 2, the total use of zinc will
decrease from 270 to 247 kilotons a decrease of 8.6, see Table 4. Compared to the overall de-
crease in output − 0.16, the policy induces a zinc dematerialisation of the economy.
4
.
2
. Scenario
2:
zinc throughput le6y A levy on the throughput of zinc negatively
influences the output of most production sectors. The associated labour tax cut has a slightly posi-
tive effect, while the total effect is negative for these sectors. Table 2 shows that this scenario has
a negative effect of more than 1 on the output of some sectors, for instance, the metal products,
construction, and the wood and furniture indus- tries. Compared with the zinc inflow levy the main
differences are that the basic metal industry is less damaged, and that most other production sectors
are affected more severely than in the first scenario.
Here, the tax burden is spread more evenly over the production sectors. The macro-economic ef-
fect on production of − 0.48 see Table 4 is more than twice as large compared to the zinc
inflow levy. This indicates that the economic costs of exempting the basic metal industry from the
zinc levy are substantial. Furthermore, the impact of the zinc levy on the basic metal industry cannot
be totally mitigated: the decrease in production of this sector still accounts for 0.1 of the total
production loss.
For households with a labour income, the ef- fects are more negative than in the base scenario.
A reason is that now more labour intensive sec- tors carry the tax burden, instead of the more
capital intensive basic metal industry. Moreover, other sectors may be better capable of transferring
the burden to their clients and eventually to consumers. For the other household groups there
is only a small, negative change, except for the self-employed.
The sectoral and distributional effects differ considerably between the inflow and throughput
levies. This is largely related to the demand for inputs from the basic metal industry. In the inflow
scenario, the basic metal industry is levied severely, and subsequently a part of the levy is
transferred to the purchasers of its products. In this way, the ‘down-stream’ producers are levied
indirectly. In the throughput levy scenario, the down-stream producers are levied directly on ba-
sis of their metal intensity. Consequently, the metal-intensive sectors generally the industrial
sectors are negatively affected, while the less metal-intensive sectors e.g. basic industries and
services can increase their output. This substanti- ates the conclusion that the basic metal industry is
not very capable of transferring its imposed extra costs to the other sectors.
The total reduction in the use of materials is smaller than in the base scenario − 4.5 instead of
− 8.6. Given the larger decrease in economic
activity, the dematerialisation of the economy is less significant. The dominant reason is that the
basic metal industry is less affected, and hence its use of materials is less reduced. Moreover, in this
scenario the intra-sectoral substitution effects that are not accounted for will presumably be larger
note that inter-sectoral substitution is taken into account. Finally, the relatively large outflow
from the basic metal industry to foreign economic sectors or outside the economic system is not
taxed in the throughput scenario, and hence there are no incentives to reduce this outflow.
4
.
3
. Scenario
3:
zinc product le6y The results of a product levy on the production
sectors in Table 2 show that the basic metal industry is strongly affected, with an output re-
duction of 13 somewhat larger than in the inflow levy case. Here, only the production from
the basic metal industry is levied. The buyers of the products of the basic metal industry may
switch to other products, affecting the basic metal industry negatively. The metal products and the
electricity supply sectors are also negatively af- fected, as their possibilities of using alternative
materials or products is limited. The basic chemi- cal industry is positively affected, partially be-
cause the intermediate production sectors are substituting zinc for other materials like plastics.
The reduction in total economic activity is very similar to that in the zinc inflow levy scenario
− 0.17 vs. − 0.16; see Table 4, indicating no significant differences in economic costs of a
product levy compared to a material inflow levy.
For most household groups this scenario and the zinc inflow scenario have similar results see
Table 3. This similarity is interesting because a product levy affects the household groups di-
rectly, in contrast to the zinc inflow scenario. Table 4 shows that the trade balance and employ-
ment effects are similar to the zinc inflow scenario.
The large decrease in the output of the basic metal industry is reflected in a relatively large
decrease in the total use of materials − 10.7, see Table 4. However, the crude assumption that
there is no substitution from the taxed metal to other metals within the same production sector is
of importance here. After all, if the use of zinc itself is taxed, the producers may substitute other
metals for zinc, inducing a reduction of zinc use at a constant input from the basic metal industry. If
the input from the basic metal industry itself is taxed, regardless of the zinc content of that input,
the producers have no incentive to switch to other metals.
4
.
4
. Scenario
4:
lead inflow le6y In this scenario the lead inflow is taxed similar
to the zinc inflow levy. The results for the pro- duction sectors show that the output of the basic
metal industry will be reduced by 7, which is less than in the corresponding zinc scenario see
Table 2. The impact of the levy on lead on various other sectors is around 0.3 – 0.4. The
spread of the lead intensities over the production sectors is larger than the zinc intensities see Table
1, making the tax burden more evenly distributed over the various production sectors. This implies
that the policy affects more production sectors negatively. The macro-economic decrease in pro-
duction is − 0.20 compared to − 0.16 for the zinc inflow levy; see Table 4. The share of the
production loss in the basic metal industry sector in total reduction of output is just over 50. The
impact of a levy on lead on household groups is roughly the same as in the corresponding zinc
scenario see Table 3. The effects on imports are negative see Table 4. The employment effects are
similar to those in the corresponding zinc sce- nario. The total use of lead decreases with 3.5.
4
.
5
. Scenario
5:
zinc and lead inflow le6y This scenario studies the combined effect of
levies on zinc and lead. This can give an insight into the economic effects of a ‘more complete’
metal policy. Policy makers may want to impose a levy on several materials simultaneously, for ex-
ample, a levy on a number of harmful materials.
Changes in the production processes to reduce tax payments are likely to have impacts on the use
of other metals as well. This correlation between two metals can be positive change to less metal-
intensive production or negative change from one metal to another. If in the zinc lead inflow
levy scenario zinc lead was substituted by lead zinc, it would be expected that in a scenario
where both metals are levied the costs of substitu- tion and the output effects would be higher, as
some of these substitution possibilities are no longer available. This latter effect does not occur,
and therefore it may be concluded that there is not much substitution between zinc and lead. For
most production sectors, household groups, em- ployment, trade and total use of materials, the
effects of this scenario are between those of the corresponding zinc and lead scenarios see Tables
3 and 4. An exception is the decrease in lead use, which is somewhat larger than if the levy is only
placed on lead use. This at first sight surprising result can easily be explained: the economic re-
structuring that is induced by the levy on zinc will also result in a reduction of lead use.
5. Concluding remarks
