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Market Power, International CO2 Taxation and Oil Wealth


  • Elin Berg
  • Snorre Kverndokk
  • Knut Einar Rosendahl


We present an intertemporal equilibrium model for fossil fuels, and study the effects on oil prices, extraction paths and oil wealth of an international carbon tax on fossil fuel consumption Our conclusion is that a carbon tax will hurt OPEC more than other producers, as the cartel is induced by its market power to restrain production in order to maintain the oil price. Thus, the effects on the oil wealth of the competitive fringe are minor, while OPECs wealth is considerably reduced. We also show by applying a competitive model that this result is due to market structure, and not to differences in the resource base.

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  • Elin Berg & Snorre Kverndokk & Knut Einar Rosendahl, 1997. "Market Power, International CO2 Taxation and Oil Wealth," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4), pages 33-71.
  • Handle: RePEc:aen:journl:1997v18-04-a02

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    References listed on IDEAS

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    Cited by:

    1. Finn Roar Aune & Ann Christin Bøeng & Snorre Kverndokk & Lars Lindholt & Knut Einar Rosendahl, 2017. "Fuel Efficiency Improvements: Feedback Mechanisms and Distributional Effects in the Oil Market," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 68(1), pages 15-45, September.
    2. Aune, Finn Roar & Grimsrud, Kristine & Lindholt, Lars & Rosendahl, Knut Einar & Storrøsten, Halvor Briseid, 2017. "Oil consumption subsidy removal in OPEC and other Non-OECD countries: Oil market impacts and welfare effects," Energy Economics, Elsevier, vol. 68(C), pages 395-409.
    3. Snorre Kverndokk & Lars Lindholt & Knut Rosendahl, 2000. "Stabilization of CO 2 concentrations: mitigation scenarios using the Petro model," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 3(2), pages 195-224, June.
    4. Nachtigall, Daniel, 2017. "Prices versus quantities: The impact of fracking on the choice of climate policy instruments in the presence of OPEC," Discussion Papers 2017/6, Free University Berlin, School of Business & Economics.
    5. Berg, Elin & Kverndokk, Snorre & Rosendahl, Knut Einar, 2002. "Oil Exploration under Climate Treaties," Journal of Environmental Economics and Management, Elsevier, vol. 44(3), pages 493-516, November.
    6. Strand, Jon, 2013. "Strategic climate policy with offsets and incomplete abatement: Carbon taxes versus cap-and-trade," Journal of Environmental Economics and Management, Elsevier, vol. 66(2), pages 202-218.
    7. Gjerde, Jon & Grepperud, Sverre & Kverndokk, Snorre, 1999. "Optimal climate policy under the possibility of a catastrophe," Resource and Energy Economics, Elsevier, vol. 21(3-4), pages 289-317, August.
    8. Daniel Nachtigall, 2017. "Prices versus Quantities: The Impact of Fracking on the Choice of Climate Policy Instruments in the Presence of OPEC," Working Papers 2017001, Berlin Doctoral Program in Economics and Management Science (BDPEMS).
    9. Jon Strand, 2010. "Taxes versus Cap-and-Trade in Climate Policy when only some Fuel Importers Abate," CESifo Working Paper Series 3233, CESifo Group Munich.
    10. Steffen Kallbekken & Jon Hovi, 2007. "The price of non-compliance with the Kyoto Protocol: The remarkable case of Norway," International Environmental Agreements: Politics, Law and Economics, Springer, vol. 7(1), pages 1-15, March.
    11. Lars Lindholt, 1999. "Beyond Kyoto: CO2 permit prices and the markets for fossil fuels," Discussion Papers 258, Statistics Norway, Research Department.
    12. Wie, Jiegen & Wennlock, Magnus & Johansson, Daniel J.A. & Sterner, Thomas, 2011. "The Fossil Endgame: Strategic Oil Price Discrimination and Carbon Taxation," Discussion Papers dp-11-26, Resources For the Future.

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    JEL classification:

    • F0 - International Economics - - General


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