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Political Economy Obstacles to Fuel Taxation

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  • Henrik Hammar, Asa Lofgren and Thomas Sterner

Abstract

Many studies have shown that fuel demand is quite elastic and that the best way to reduce fuel use (to tackle climate issues) is by taxing fuel. Yet it seems almost impossible to do so, particularly in those countries with low prices and high demand. The purpose of this paper is to cast light on the difficulties of raising gasoline taxes by analyzing the determinants of gasoline taxation. We believe that one of the reasons for the difficulties is that political pressure influences the political decisions regarding taxation of gasoline consumption. Not only do low taxes and thus low prices encourage high consumption, but high levels of consumption also lead to considerable pressure against raising the taxes. Our findings also point to the significance of other factors such as government debt (a higher debt leads to a higher gasoline tax rate).

Suggested Citation

  • Henrik Hammar, Asa Lofgren and Thomas Sterner, 2004. "Political Economy Obstacles to Fuel Taxation," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3), pages 1-18.
  • Handle: RePEc:aen:journl:2004v25-03-a01
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    References listed on IDEAS

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    1. Lopez Ramon, 1994. "The Environment as a Factor of Production: The Effects of Economic Growth and Trade Liberalization," Journal of Environmental Economics and Management, Elsevier, vol. 27(2), pages 163-184, September.
    2. Paul L. Joskow & Richard Schmalensee, 1988. "Markets for Power: An Analysis of Electrical Utility Deregulation," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262600188, January.
    3. Antonio Estache, 1994. "World Development Report: Infrastructure for Development," ULB Institutional Repository 2013/44144, ULB -- Universite Libre de Bruxelles.
    4. Jorgenson, Dale W, 1981. " Energy Prices and Productivity Growth," Scandinavian Journal of Economics, Wiley Blackwell, vol. 83(2), pages 165-179.
    5. Sam H. Schurr, 1982. "Energy Efficiency and Productive Efficiency: Some Thoughts Based on American Experience," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3), pages 3-14.
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    JEL classification:

    • F0 - International Economics - - General

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