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Why Tax Energy? Towards a More Rational Energy Policy

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  • Newbery, D.

Abstract

The same fuels are taxed at widely different rates in different countries while different fuels are taxed at widely different rates within and across countries. Coal, oil and gas are all used to generate electricity, but are subject to very different tax or subsidy regimes. This paper considers what tax theory has to say about efficient energy tax design. The main factors for energy taxes are the optimal tariff argument, the need to correct externalities such as global warming, and second-best considerations for taxing transport fuels as road charges, but these are inadequate to explain current energy taxes. EU energy tax harmonisation and Kyoto suggest that the time is ripe to reform energy taxation.

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File URL: http://www.econ.cam.ac.uk/electricity/publications/wp/ep72.pdf
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Bibliographic Info

Paper provided by Faculty of Economics, University of Cambridge in its series Cambridge Working Papers in Economics with number 0508.

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Length: 35
Date of creation: Jan 2005
Date of revision:
Handle: RePEc:cam:camdae:0508

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Related research

Keywords: tax; energy; oil; optimal tariff; externalities; exhaustible resources; global warming; road charges;

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  1. Deaton, Angus & Stern, Nicholas, 1986. "Optimally uniform commodity taxes, taste differences and lump-sum grants," Economics Letters, Elsevier, vol. 20(3), pages 263-266.
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Cited by:
  1. Vollebergh, Herman R.J., 2008. "Lessons from the polder: Energy tax design in The Netherlands from a climate change perspective," Ecological Economics, Elsevier, vol. 64(3), pages 660-672, January.
  2. Jörg Peters & Sascha Thielmann, 2008. "Promoting Biofuels: Implications for Developing Countries," Ruhr Economic Papers 0038, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
  3. Labandeira, Xavier & Labeaga, José M. & Rodríguez, Miguel, 2009. "An integrated economic and distributional analysis of energy policies," Energy Policy, Elsevier, vol. 37(12), pages 5776-5786, December.
  4. Zhang, Yan, 2008. "Tariff and Equilibrium Indeterminacy," MPRA Paper 11370, University Library of Munich, Germany.
  5. Xavier Labandeira & José M. Labeaga & Miguel Rodríguez, 2006. "A Macro and Microeconomic Integrated Approach to Assessing the Effects of Public Policies," Working Papers 22, ECINEQ, Society for the Study of Economic Inequality.
  6. CHATON Corinne & CRETI Anna & VILLENEUVE Bertrand, 2006. "The Economics of Seasonal Gas Storage," LERNA Working Papers 06.01.194, LERNA, University of Toulouse.
  7. Zhang, Yan, 2008. "Tariff and Equilibrium Indeterminacy--(II)," MPRA Paper 10043, University Library of Munich, Germany.
  8. Zhang, Yan & Chen, Yan, 2008. "Tariff and Equilibrium Indeterminacy--A Note," MPRA Paper 10044, University Library of Munich, Germany.
  9. Alberto Petrucci, 2010. "Second-Best Optimal Taxation of Oil and Capital in a Small Open Economy," Working Papers 2010.20, Fondazione Eni Enrico Mattei.

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