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Importer and Producer Petroleum Taxation

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  • Jon Strand

Abstract

We derive non-cooperative Nash equilibrium (NE) importer and exporter petroleum excise taxes given full within-group tax coordination, but no coordination between groups, assuming that importers do not produce and exporters do not consume petroleum, and petroleum consumption causes a global externality. The aggregate NE tax is found to consist of an externality component and an optimal tariff component, and exceeds the standard Pigou tax. The environmental component in isolation is however less than the Pigou tax. With Stackelberg tax setting, the leader''s tax is higher than in the Ne, and the follower''s tax lower, and the overall tax higher. We show that importers prefer to set a tax instead of an import quota, since exporters'' optimal response to a quota is a higher tax. An optimal cap-and-trade scheme will thus fare worse than an optimal tax scheme for importers, and will imply greater petroleum consumption and carbon emissions. When exporters behave as a cartel satisfying demand at a fixed export price, exporters'' optimal tax is higher, while importers tax rule is Pigouvian. Exporters then gain at the expense of importers.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 08/35.

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Length: 23
Date of creation: 01 Feb 2008
Date of revision:
Handle: RePEc:imf:imfwpa:08/35

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Keywords: Oil; Taxation; Oil consumption; Oil production; exporter; exporters; petroleum consumption; carbon emissions; opec; fossil fuels; export tax; petroleum supply; fuel consumption; export price; petroleum taxation; greenhouse gas; oil exports; fossil fuel; gas emissions; greenhouse gas emissions; petroleum market; oil exporters; oil supply; natural gas; export taxes; oil market; petroleum export; renewable resources; exporting countries; crude oil; oil imports; export supply; crude oil market; fuels consumption; oil exporting; petroleum prices; petroleum importing countries; fossil fuel taxation; oil import; greenhouse gases; harmful emissions;

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References

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  13. Jon Strand & Michael Keen, 2006. "Indirect Taxeson International Aviation," IMF Working Papers 06/124, International Monetary Fund.
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Cited by:
  1. Jon Strand, 2007. "Energy Efficiency and Renewable Energy Supply for the G-7 Countries, with Emphasison Germany," IMF Working Papers 07/299, International Monetary Fund.

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