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Energy Taxes and Oil Price Shocks

Listed author(s):
  • Cremer Helmuth

    ()

    (Toulouse School of Economics, IDEI, GREMAQ and Institut Universitaire de France, Toulouse, France)

  • Gahvari Firouz

    ()

    (Department of Economics, University of Illinois at Urbana-Champaign, Urbana, IL 61801, USA)

  • Ladoux Norbert

    ()

    (Toulouse School of Economics, IDEI and LERNA, Toulouse, France)

This paper examines if an energy price shock should be compensated by a reduction in energy taxes to mitigate its impact on consumer prices. It shows that the consumer price should not increase by as much as the producer price, implying a small reduction in the energy tax in dollars. The energy tax rate, on the other hand, decreases sharply. This decline is primarily due to an adjustment in the Pigouvian component: A constant marginal social damage being divided by a higher producer price. The redistributive component of the tax remains at about 10% of the social cost of energy.

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File URL: https://www.degruyter.com/view/j/bejeap.2015.15.issue-2/bejeap-2014-0098/bejeap-2014-0098.xml?format=INT
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Article provided by De Gruyter in its journal The B.E. Journal of Economic Analysis & Policy.

Volume (Year): 15 (2015)
Issue (Month): 2 (April)
Pages: 475-501

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Handle: RePEc:bpj:bejeap:v:15:y:2015:i:2:p:475-501:n:15
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  1. Cremer, Helmuth & Gahvari, Firouz & Ladoux, Norbert, 1998. "Externalities and optimal taxation," Journal of Public Economics, Elsevier, vol. 70(3), pages 343-364, December.
  2. Mayeres, Inge & Proost, Stef, 1997. " Optimal Tax and Public Investment Rules for Congestion Type of Externalities," Scandinavian Journal of Economics, Wiley Blackwell, vol. 99(2), pages 261-279, June.
  3. Cremer, Helmuth & Gahvari, Firouz & Ladoux, Norbert, 2010. "Environmental tax design with endogenous earning abilities (with applications to France)," Journal of Environmental Economics and Management, Elsevier, vol. 59(1), pages 82-93, January.
  4. Cremer, Helmuth & Gahvari, Firouz & Ladoux, Norbert, 2001. "Environmental Taxes with Heterogeneous Consumers: An Application to Energy Consumption in France," IDEI Working Papers 127, Institut d'Économie Industrielle (IDEI), Toulouse, revised 2002.
  5. Bourguignon, F. & Spadaro, A., 2000. "Social Preferences Revealed through Effective Marginal Tax Rates," DELTA Working Papers 2000-29, DELTA (Ecole normale supérieure).
  6. Naito, Hisahiro, 1999. "Re-examination of uniform commodity taxes under a non-linear income tax system and its implication for production efficiency," Journal of Public Economics, Elsevier, vol. 71(2), pages 165-188, February.
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