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Designing an electricity tax system in presence of international regulations and multiple public goals: An empirical assessment


  • Bjertnæs, Geir H.
  • Fæhn, Taran
  • Aasness, Jørgen


The European competition rules restrict governments' opportunity to differentiate terms of energy accessibility among firms and industries. This easily runs counter with regional and industrial goals of national energy policies. Norway levies a tax on use of electricity, but exempts main industrial usages. This analysis assesses alternative, internationally legal, designs of the system in terms of their effects on efficiency and distribution, including industrial objectives. Among the reforms we explore, removing the exemptions would be the most effective way of raising revenue, but it would be politically costly by deteriorating the competitiveness of today's favoured industries. An entire abolishment of the electricity tax, and replacing revenue by increased VAT, would generate a more equal distribution of standard of living and, at the same time, avoid the trade-off between efficiency and competitiveness.

Suggested Citation

  • Bjertnæs, Geir H. & Fæhn, Taran & Aasness, Jørgen, 2008. "Designing an electricity tax system in presence of international regulations and multiple public goals: An empirical assessment," Energy Policy, Elsevier, vol. 36(10), pages 3723-3733, October.
  • Handle: RePEc:eee:enepol:v:36:y:2008:i:10:p:3723-3733

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    References listed on IDEAS

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    4. Diamond, Peter A & Mirrlees, James A, 1971. "Optimal Taxation and Public Production: I--Production Efficiency," American Economic Review, American Economic Association, vol. 61(1), pages 8-27, March.
    5. Bjertnæs, Geir H. & Fæhn, Taran, 2008. "Energy taxation in a small, open economy: Social efficiency gains versus industrial concerns," Energy Economics, Elsevier, vol. 30(4), pages 2050-2071, July.
    6. Myles,Gareth D., 1995. "Public Economics," Cambridge Books, Cambridge University Press, number 9780521497695, March.
    7. Lawrence H. Goulder & Roberton C. Williams III, 2003. "The Substantial Bias from Ignoring General Equilibrium Effects in Estimating Excess Burden, and a Practical Solution," Journal of Political Economy, University of Chicago Press, vol. 111(4), pages 898-927, August.
    8. Bowitz, Einar & Cappelen, Adne, 2001. "Modeling income policies: some Norwegian experiences 1973-1993," Economic Modelling, Elsevier, vol. 18(3), pages 349-379, August.
    9. Brita Bye & Karine Nyborg, 2003. "Are Differentiated Carbon Taxes Inefficient? A General Equilibrium Analysis," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2), pages 95-112.
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