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Political Economy Obstacles to Fuel Taxation

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  • Henrik Hammar, Asa Lofgren and Thomas Sterner

Abstract

Many studies have shown that fuel demand is quite elastic and that the best way to reduce fuel use (to tackle climate issues) is by taxing fuel. Yet it seems almost impossible to do so, particularly in those countries with low prices and high demand. The purpose of this paper is to cast light on the difficulties of raising gasoline taxes by analyzing the determinants of gasoline taxation. We believe that one of the reasons for the difficulties is that political pressure influences the political decisions regarding taxation of gasoline consumption. Not only do low taxes and thus low prices encourage high consumption, but high levels of consumption also lead to considerable pressure against raising the taxes. Our findings also point to the significance of other factors such as government debt (a higher debt leads to a higher gasoline tax rate).

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Bibliographic Info

Article provided by International Association for Energy Economics in its journal The Energy Journal.

Volume (Year): Volume 25 (2004)
Issue (Month): Number 3 ()
Pages: 1-18

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Handle: RePEc:aen:journl:2004v25-03-a01

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Cited by:
  1. Wadud, Zia, 2011. "Personal tradable carbon permits for road transport: Why, why not and who wins?," Transportation Research Part A: Policy and Practice, Elsevier, vol. 45(10), pages 1052-1065.
  2. Shiau, Ching-Shin Norman & Michalek, Jeremy J. & Hendrickson, Chris T., 2009. "A structural analysis of vehicle design responses to Corporate Average Fuel Economy policy," Transportation Research Part A: Policy and Practice, Elsevier, vol. 43(9-10), pages 814-828, November.
  3. Delucchi, Mark, 2007. "Do Motor-Vehicle Users in the US Pay Their Way?," Institute of Transportation Studies, Working Paper Series qt2884w7km, Institute of Transportation Studies, UC Davis.
  4. Jun Li, 2011. "Decoupling urban transport from GHG emissions in Indian cities--A critical review and perspectives," Post-Print hal-00596587, HAL.
  5. Burke, Paul J. & Nishitateno, Shuhei, 2013. "Gasoline prices, gasoline consumption, and new-vehicle fuel economy: Evidence for a large sample of countries," Energy Economics, Elsevier, vol. 36(C), pages 363-370.
  6. Avner, Paolo & Rentschler, Jun & Hallegatte, Stephane, 2014. "Carbon price efficiency : lock-in and path dependence in urban forms and transport infrastructure," Policy Research Working Paper Series 6941, The World Bank.
  7. Strand, Jon, 2013. "Political economy aspects of fuel subsidies : a conceptual framework," Policy Research Working Paper Series 6392, The World Bank.
  8. Eskeland, Gunnar S. & Mideksa, Torben K., 2008. "Transportation fuel use, technology and standards: The role of credibility and expectations," Policy Research Working Paper Series 4695, The World Bank.
  9. Li, Shanjun & Linn, Joshua & Muehlegger, Erich, 2012. "Gasoline Taxes and Consumer Behavior," Working Paper Series rwp12-006, Harvard University, John F. Kennedy School of Government.
  10. Parry, Ian & Small, Kenneth, 2002. "Does Britain or the United States Have the Right Gasoline Tax?," Discussion Papers dp-02-12-, Resources For the Future.
  11. Sterner, Thomas, 2007. "Fuel taxes: An important instrument for climate policy," Energy Policy, Elsevier, vol. 35(6), pages 3194-3202, June.
  12. Julien Daubanes & Lisa Leinert, 2012. "Optimum Tariffs and Exhaustible Resources: Theory and Evidence for Gasoline," CER-ETH Economics working paper series 12/163, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
  13. Amihai Glazer & Stef Proost, 2007. "The Preferences of Voters Over Road Tolls and Road Capacity," Working Papers 060712, University of California-Irvine, Department of Economics.
  14. Delucchi, Mark, 2007. "Do Motor-Vehicle Users in the US Pay Their Way?," Institute of Transportation Studies, Working Paper Series qt5841z3kx, Institute of Transportation Studies, UC Davis.
  15. Li, Shanjun & Linn, joshua & Muehlegger, Erich J., 2012. "Gasoline Taxes and Consumer Behavior," Scholarly Articles 8506866, Harvard Kennedy School of Government.
  16. Delucchi, Mark A., 2007. "Do motor-vehicle users in the US pay their way?," Transportation Research Part A: Policy and Practice, Elsevier, vol. 41(10), pages 982-1003, December.
  17. Flood, Lennart & Islam, Nizamul & Sterner, Thomas, 2007. "Are demand elasticities affected by politically determined tax levels? : simultaneous estimates of gasoline demand and price," Working Papers in Economics 274, University of Gothenburg, Department of Economics.
  18. Vladimir Kossov & Elena Kossova, 2013. "International dispersion of retail diesel fuel prices and the estimation of normal price values," HSE Working papers WP BRP 27/EC/2013, National Research University Higher School of Economics.
  19. Kossov, Vladimir & Kossova, Elena, 2013. "The normal price. The case of the retail price of diesel fuel," MPRA Paper 48667, University Library of Munich, Germany, revised 12 Oct 2013.
  20. Hsu, Shi-Ling & Walters, Joshua & Purgas, Anthony, 2008. "Pollution tax heuristics: An empirical study of willingness to pay higher gasoline taxes," Energy Policy, Elsevier, vol. 36(9), pages 3612-3619, September.

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