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On The Path Of An Oil Pigovian Tax

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  • ANTOINE BELGODERE

Abstract

This paper studies optimal climate policy in the presence of oil rents. Several authors have found that, according to Hotelling's rule, in the long run, the optimal ad valorem tax must decrease. However, if the pollution is a stock and if environmental concerns impose stopping the resource extraction before its exhaustion, we show that an ad valorem tax defined over the rent cannot decentralize the optimum. In this case, an increasing per-unit tax can decentralize the optimum. Such a tax implies the disappearance of the Hotelling rent. Thus, the extraction problem reduces to a pollution-control problem. Copyright � 2009 The Author. Journal compilation � 2009 Blackwell Publishing Ltd and The University of Manchester.

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Bibliographic Info

Article provided by University of Manchester in its journal The Manchester School.

Volume (Year): 77 (2009)
Issue (Month): 5 (09)
Pages: 632-649

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Handle: RePEc:bla:manchs:v:77:y:2009:i:5:p:632-649

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  1. Schulze, William D., 1974. "The optimal use of non-renewable resources: The theory of extraction," Journal of Environmental Economics and Management, Elsevier, vol. 1(1), pages 53-73, May.
  2. Forster, Bruce A., 1975. "Optimal pollution control with a nonconstant exponential rate of decay," Journal of Environmental Economics and Management, Elsevier, vol. 2(1), pages 1-6, September.
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  11. Schou, Poul, 2002. " When Environmental Policy Is Superfluous: Growth and Polluting Resources," Scandinavian Journal of Economics, Wiley Blackwell, vol. 104(4), pages 605-20, December.
  12. Withagen, Cees, 1994. "Pollution and exhaustibility of fossil fuels," Resource and Energy Economics, Elsevier, vol. 16(3), pages 235-242, August.
  13. Noel, Michael, 1978. "Resource extraction and recycling with environmental costs," Journal of Environmental Economics and Management, Elsevier, vol. 5(3), pages 220-235, September.
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Cited by:
  1. Julien Daubanes & André Grimaud, 2010. "Taxation of a Polluting Non-renewable Resource in the Heterogeneous World," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 47(4), pages 567-588, December.

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