Efficient management of insecure fossil fuel imports through taxing (!) domestic green energy?
AbstractA small open economy produces a consumer good along with green and black energy and imports fossil fuel for black-energy production at an uncertain world market price. Efficient risk management requires curbing fuel consumption, and hence carbon emissions, when consumers are prudent. Moreover, if consumer preferences display constant absolute risk aversion (implying prudence), an efficient response to increasing risk is promoting green energy and reducing total energy production. Unregulated competitive markets are inefficient when consumers are risk averse. With the plausible assumption of prudent consumers and risk neutral producers, taxing both fossil fuel and green energy restores efficiency.
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Bibliographic InfoPaper provided by Universität Siegen, Fakultät Wirtschaftswissenschaften, Wirtschaftsinformatik und Wirtschaftsrecht in its series Volkswirtschaftliche Diskussionsbeiträge with number 138-09.
Length: 21 pages
Date of creation: 2009
Date of revision:
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More information through EDIRC
Price uncertainty; black energy; green energy; fossil fuel;
Other versions of this item:
- Thomas Eichner & Rüdiger Pethig, 2010. "Efficient Management of Insecure Fossil Fuel Imports through Taxing (!) Domestic Green Energy?," CESifo Working Paper Series 3062, CESifo Group Munich.
- F18 - International Economics - - Trade - - - Trade and Environment
- Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
- Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-09-26 (All new papers)
- NEP-ENE-2009-09-26 (Energy Economics)
- NEP-ENV-2009-09-26 (Environmental Economics)
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