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Fossil fuels supplied by oligopolies : On optimal taxation and rent capture

  • DAUBANES Julien

This article investigates the optimal taxation of a polluting exhaustible resource supplied by an oligopoly in a partial equilibrium model. A single tax/subsidy scheme is sufficient to correct both distortions arising from market power and pollution externality. Moreover, there exists an infinite family of such optimal taxation instruments. Then, I study how this set is affected by the degree of concentration of the resource suppliers. In particular, the more concentrated the extraction sector, the less falling (or the more rising) over time the optimal tax rate. Finally, although concentration tends to increase the total rent of the extraction sector, it reduces the potential tax revenues to be earned by the regulator while inducing efficiency.

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File URL: http://www2.toulouse.inra.fr/lerna/travaux/cahiers2007/07.22.243.pdf
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Paper provided by LERNA, University of Toulouse in its series LERNA Working Papers with number 07.22.243.

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Date of creation: Dec 2007
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Handle: RePEc:ler:wpaper:07.22.243
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  1. Lewis, Tracy R & Matthews, Steven A & Burness, H Stuart, 1979. "Monopoly and the Rate of Extraction of Exhaustible Resources: Note," American Economic Review, American Economic Association, vol. 69(1), pages 227-30, March.
  2. Bergstrom, Theodore C, 1982. "On Capturing Oil Rents with a National Excise Tax," American Economic Review, American Economic Association, vol. 72(1), pages 194-201, March.
  3. Chakravorty, Ujjayant & Magne, Bertrand & Moreaux, Michel, 2006. "A Hotelling model with a ceiling on the stock of pollution," Journal of Economic Dynamics and Control, Elsevier, vol. 30(12), pages 2875-2904, December.
  4. repec:ner:tilbur:urn:nbn:nl:ui:12-3107033 is not listed on IDEAS
  5. Im, Jeong-Bin, 2002. "Optimal taxation of exhaustible resource under monopoly," Energy Economics, Elsevier, vol. 24(3), pages 183-197, May.
  6. Bergstrom, Theodore C. & Cross, John G. & Porter, Richard C., 1981. "Efficiency-inducing taxation for a monopolistically supplied depletable resource," Journal of Public Economics, Elsevier, vol. 15(1), pages 23-32, February.
  7. Daubanes, J., 2007. "On the Optimal Taxation of an Exhaustible Resource Under Monopolistic Extraction," Discussion Paper 2007-34, Tilburg University, Center for Economic Research.
  8. Groth, Christian & Schou, Poul, 2007. "Growth and non-renewable resources: The different roles of capital and resource taxes," Journal of Environmental Economics and Management, Elsevier, vol. 53(1), pages 80-98, January.
  9. Grimaud, Andre & Rouge, Luc, 2005. "Polluting non-renewable resources, innovation and growth: welfare and environmental policy," Resource and Energy Economics, Elsevier, vol. 27(2), pages 109-129, June.
  10. Withagen, Cees, 1994. "Pollution and exhaustibility of fossil fuels," Resource and Energy Economics, Elsevier, vol. 16(3), pages 235-242, August.
  11. DAUBANES Julien & GRIMAUD André, 2006. "On the North-South Effects of Environmental Policy: Rent Transfers, Relocation and Growth," LERNA Working Papers 06.26.219, LERNA, University of Toulouse.
  12. Hassan Benchekroun & Ngo Van Long, 1997. "Efficiency Inducing Taxation for Polluting Oligopolists," CIRANO Working Papers 97s-21, CIRANO.
  13. Ulph, Alistair & Ulph, David, 1994. "The Optimal Time Path of a Carbon Tax," Oxford Economic Papers, Oxford University Press, vol. 46(0), pages 857-68, Supplemen.
  14. Karp, Larry & Livernois, John, 1992. "On efficiency-inducing taxation for a non-renewable resource monopolist," Journal of Public Economics, Elsevier, vol. 49(2), pages 219-239, November.
  15. Tullock, Gordon, 1979. "Monopoly and the Rate of Extraction of Exhaustible Resources: Note," American Economic Review, American Economic Association, vol. 69(1), pages 231-33, March.
  16. Gamponia, Villamor & Mendelsohn, Robert, 1985. "The Taxation of Exhaustible Resources," The Quarterly Journal of Economics, MIT Press, vol. 100(1), pages 165-81, February.
  17. Julien Daubanes, 2008. "Optimal taxation of a monopolistic extractor: are subsidies necessary?," CER-ETH Economics working paper series 08/92, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
  18. Sinclair, Peter J N, 1992. "High Does Nothing and Rising Is Worse: Carbon Taxes Should Keep Declining to Cut Harmful Emissions," The Manchester School of Economic & Social Studies, University of Manchester, vol. 60(1), pages 41-52, March.
  19. Stiglitz, Joseph E, 1976. "Monopoly and the Rate of Extraction of Exhaustible Resources," American Economic Review, American Economic Association, vol. 66(4), pages 655-61, September.
  20. Benchekroun, Hassan & Van Long, Ngo, 2002. "On the multiplicity of efficiency-inducing tax rules," Economics Letters, Elsevier, vol. 76(3), pages 331-336, August.
  21. Solow, Robert M, 1974. "The Economics of Resources or the Resources of Economics," American Economic Review, American Economic Association, vol. 64(2), pages 1-14, May.
  22. repec:dgr:kubcen:200734 is not listed on IDEAS
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