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Resource Rent Taxation and Benchmarking.A New Perspective for the Swiss Hydropower Sector

Author

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  • Silvia Banfi

    () (Centre for Energy Policy and Economics, ETH)

  • Massimo Filippini

    () (Università della Svizzera italiana, Centre for Energy Policy and Economics, ETH)

Abstract

The electricity generation in Switzerland is mainly based on hydropower (55% of total production). The exploitation of water in the hydropower sector can generate significant so-called resource rents. These are defined by the surplus return above the value of capital, labor, materials and energy used to exploit hydropower. In Switzerland, hydropower producers pay to the State a fixed fee per kW gross capacity. With this system the substantial differences in costs, revenues and in the production characteristics of the hydropower plants are not taken into account. In this context, the following paper has two main goals: 1) To discuss the introduction in the Swiss hydropower sector of a new payment system based on a resource rent tax; 2) To propose a combination of a RRT system with a benchmarking analysis of the production cost obtained through the estimation of a stochastic frontier variable cost function. We estimate a true random effects stochastic frontier variable cost function using panel data in order to overcome the asymmetric information problem. In addition, using the information on cost efficiency of the single companies, we show how to introduce in the RRT scheme a benchmark system which gives incentives to minimize the production costs.

Suggested Citation

  • Silvia Banfi & Massimo Filippini, 2009. "Resource Rent Taxation and Benchmarking.A New Perspective for the Swiss Hydropower Sector," Quaderni della facoltà di Scienze economiche dell'Università di Lugano 0906, USI Università della Svizzera italiana.
  • Handle: RePEc:lug:wpaper:0906
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Alberto Gago & Xavier Labandeira & Xiral López Otero, 2014. "A Panorama on Energy Taxes and Green Tax Reforms," Hacienda Pública Española, IEF, vol. 208(1), pages 145-190, March.
    2. Ries, Jan & Gaudard, Ludovic & Romerio, Franco, 2016. "Interconnecting an isolated electricity system to the European market: The case of Malta," Utilities Policy, Elsevier, vol. 40(C), pages 1-14.
    3. repec:kap:jproda:v:49:y:2018:i:1:d:10.1007_s11123-017-0522-6 is not listed on IDEAS
    4. Massarutto, Antonio & Pontoni, Federico, 2015. "Rent seizing and environmental concerns: A parametric valuation of the Italian hydropower sector," Energy Policy, Elsevier, vol. 78(C), pages 31-40.
    5. Thomas Geissmann & Massimo Filippini & William Greene, 2014. "Persistent and Transient Cost Efficiency – An Application to the Swiss Hydropower Sector," CER-ETH Economics working paper series 16/251, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.

    More about this item

    Keywords

    Resource Rent Taxation; Hydropower; Efficiency;

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

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