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Fossil fuels supplied by oligopolies: On optimal taxation and rent capture

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Author Info
Julien Daubanes () (CER-ETH at Swiss Federal Institute of Technology Zürich and LERNA at Toulouse School of Economics)

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Abstract

This article investigates the optimal taxation of a polluting exhaustible resource supplied by an oligopoly in a partial equilibrium model. A single tax/subsidy scheme is sufficient to correct both distortions arising from market power and pollution externality. Moreover, there exists an infinite family of such optimal taxation instruments. Then, I study how this set is affected by the degree of concentration of the resource suppliers. In particular, the more concentrated the extraction sector, the less falling (or the more rising) over time the optimal tax rate. Finally, although concentration tends to increase the total rent of the extraction sector, it reduces the potential tax revenues to be earned by the regulator while inducing efficiency.

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File URL: http://economicsbulletin.vanderbilt.edu/2008/volume17/EB-08Q30001A.pdf
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Publisher Info
Article provided by Economics Bulletin in its journal Economics Bulletin.

Volume (Year): 17 (2008)
Issue (Month): 13 ()
Pages: 1-11
Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Handle: RePEc:ebl:ecbull:v:17:y:2008:i:13:p:1-11

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Related research
Keywords: Exhaustible resources; Atmospheric pollution; Imperfect competition; Optimal taxation; Cost of regulation;

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Find related papers by JEL classification:
Q3 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation
H2 - Public Economics - - Taxation, Subsidies, and Revenue

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Karp, Larry & Livernois, John, 1992. "On efficiency-inducing taxation for a non-renewable resource monopolist," Journal of Public Economics, Elsevier, vol. 49(2), pages 219-239, November. [Downloadable!] (restricted)
  2. DAUBANES Julien, 2007. "On the Optimal Taxation of an Exhaustible Resource under Monopolistic Extraction," Working Papers 07.09.230, LERNA, University of Toulouse. [Downloadable!]
    Other versions:
  3. Benchekroun, Hassan & van Long, Ngo, 1998. "Efficiency inducing taxation for polluting oligopolists," Journal of Public Economics, Elsevier, vol. 70(2), pages 325-342, November. [Downloadable!] (restricted)
    Other versions:
  4. DAUBANES Julien & GRIMAUD André, 2006. "On the North-South Effects of Environmental Policy: Rent Transfers, Relocation and Growth," Working Papers 06.26.219, LERNA, University of Toulouse. [Downloadable!]
  5. Lewis, Tracy R & Matthews, Steven A & Burness, H Stuart, 1979. "Monopoly and the Rate of Extraction of Exhaustible Resources: Note," American Economic Review, American Economic Association, vol. 69(1), pages 227-30, March.
    Other versions:
  6. Benchekroun, Hassan & Van Long, Ngo, 2002. "On the multiplicity of efficiency-inducing tax rules," Economics Letters, Elsevier, vol. 76(3), pages 331-336, August. [Downloadable!] (restricted)
  7. Ted Bergstrom, 1982. "On Capturing Oil Rents with a National Excise Tax," University of California at Santa Barbara, Economics Working Paper Series 1982A, Department of Economics, UC Santa Barbara. [Downloadable!]
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  8. Stiglitz, Joseph E, 1976. "Monopoly and the Rate of Extraction of Exhaustible Resources," American Economic Review, American Economic Association, vol. 66(4), pages 655-61, September. [Downloadable!] (restricted)
  9. Solow, Robert M, 1974. "The Economics of Resources or the Resources of Economics," American Economic Review, American Economic Association, vol. 64(2), pages 1-14, May.
  10. Chakravorty, Ujjayant & Magne, Bertrand & Moreaux, Michel, 2006. "A Hotelling model with a ceiling on the stock of pollution," Journal of Economic Dynamics and Control, Elsevier, vol. 30(12), pages 2875-2904, December. [Downloadable!] (restricted)
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  11. Withagen, Cees, 1994. "Pollution and exhaustibility of fossil fuels," Resource and Energy Economics, Elsevier, vol. 16(3), pages 235-242, August. [Downloadable!] (restricted)
  12. Im, Jeong-Bin, 2002. "Optimal taxation of exhaustible resource under monopoly," Energy Economics, Elsevier, vol. 24(3), pages 183-197, May. [Downloadable!] (restricted)
  13. Sinclair, Peter J N, 1992. "High Does Nothing and Rising Is Worse: Carbon Taxes Should Keep Declining to Cut Harmful Emissions," The Manchester School of Economic & Social Studies, Blackwell Publishing, vol. 60(1), pages 41-52, March.
  14. Ulph, Alistair & Ulph, David, 1994. "The Optimal Time Path of a Carbon Tax," Oxford Economic Papers, Oxford University Press, vol. 46(0), pages 857-68, Supplemen. [Downloadable!] (restricted)
  15. Groth, Christian & Schou, Poul, 2007. "Growth and non-renewable resources: The different roles of capital and resource taxes," Journal of Environmental Economics and Management, Elsevier, vol. 53(1), pages 80-98, January. [Downloadable!] (restricted)
  16. Gamponia, Villamor & Mendelsohn, Robert, 1985. "The Taxation of Exhaustible Resources," The Quarterly Journal of Economics, MIT Press, vol. 100(1), pages 165-81, February. [Downloadable!] (restricted)
  17. Bergstrom, Theodore C. & Cross, John G. & Porter, Richard C., 1981. "Efficiency-inducing taxation for a monopolistically supplied depletable resource," Journal of Public Economics, Elsevier, vol. 15(1), pages 23-32, February. [Downloadable!] (restricted)
    Other versions:
  18. Tullock, Gordon, 1979. "Monopoly and the Rate of Extraction of Exhaustible Resources: Note," American Economic Review, American Economic Association, vol. 69(1), pages 231-33, March. [Downloadable!] (restricted)
  19. Grimaud, Andre & Rouge, Luc, 2005. "Polluting non-renewable resources, innovation and growth: welfare and environmental policy," Resource and Energy Economics, Elsevier, vol. 27(2), pages 109-129, June. [Downloadable!] (restricted)
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. DAUBANES Julien, 2009. "Taxation of Oil Products and GDP Dynamics of Oil-rich Countries," Working Papers 09.03.279, LERNA, University of Toulouse. [Downloadable!]
    Other versions:
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