Optimal Fossil-Fuel Taxation with Backstop Technologies and Tenure Risk

The paper derives the global welfare-optimizing time path for a tax on fossil fuels causing a negative stock externality (climate change), under increasing marginal extraction cost, and in the presence of an unlimited backstop resource causing no externality. In a basic competitive case, the optimal...

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Main Author:	Strand, Jon
Format:	Journal Article
Language:	EN
Published:	2012
Subjects:	Taxation and Subsidies: Efficiency Optimal Taxation H210 Taxation and Subsidies: Externalities Redistributive Effects Environmental Taxes and Subsidies H230 Business Taxes and Subsidies including sales and value-added (VAT) H250 Mining, Extraction, and Refining: Hydrocarbon Fuels L710 Energy: Demand and Supply Q410
Online Access:	http://hdl.handle.net/10986/4964

id	okr-10986-4964
recordtype	oai_dc
spelling	okr-10986-49642021-04-23T14:02:20Z Optimal Fossil-Fuel Taxation with Backstop Technologies and Tenure Risk Strand, Jon Taxation and Subsidies: Efficiency Optimal Taxation H210 Taxation and Subsidies: Externalities Redistributive Effects Environmental Taxes and Subsidies H230 Business Taxes and Subsidies including sales and value-added (VAT) H250 Mining, Extraction, and Refining: Hydrocarbon Fuels L710 Energy: Demand and Supply Q410 The paper derives the global welfare-optimizing time path for a tax on fossil fuels causing a negative stock externality (climate change), under increasing marginal extraction cost, and in the presence of an unlimited backstop resource causing no externality. In a basic competitive case, the optimal tax equals the Pigou rate, equivalent to the present discounted value of marginal damage costs. We consider two separate types of tenure insecurity for resource owners, and their impact on the tax implementing the optimal policy. When insecure control is with respect to future ownership to the resource, competitive extraction is higher than otherwise, and the efficiency-implementing tax exceeds the Pigou rate. When tenure insecurity instead implies possible expropriation ("holdup") of investment in extraction capacity, it deters extraction, and the optimal tax is lower than the Pigou rate. 2012-03-30T07:30:36Z 2012-03-30T07:30:36Z 2010 Journal Article Energy Economics 01409883 http://hdl.handle.net/10986/4964 EN http://creativecommons.org/licenses/by-nc-nd/3.0/igo World Bank Journal Article
repository_type	Digital Repository
institution_category	Foreign Institution
institution	Digital Repositories
building	World Bank Open Knowledge Repository
collection	World Bank
language	EN
topic	Taxation and Subsidies: Efficiency Optimal Taxation H210 Taxation and Subsidies: Externalities Redistributive Effects Environmental Taxes and Subsidies H230 Business Taxes and Subsidies including sales and value-added (VAT) H250 Mining, Extraction, and Refining: Hydrocarbon Fuels L710 Energy: Demand and Supply Q410
spellingShingle	Taxation and Subsidies: Efficiency Optimal Taxation H210 Taxation and Subsidies: Externalities Redistributive Effects Environmental Taxes and Subsidies H230 Business Taxes and Subsidies including sales and value-added (VAT) H250 Mining, Extraction, and Refining: Hydrocarbon Fuels L710 Energy: Demand and Supply Q410 Strand, Jon Optimal Fossil-Fuel Taxation with Backstop Technologies and Tenure Risk
relation	http://creativecommons.org/licenses/by-nc-nd/3.0/igo
description	The paper derives the global welfare-optimizing time path for a tax on fossil fuels causing a negative stock externality (climate change), under increasing marginal extraction cost, and in the presence of an unlimited backstop resource causing no externality. In a basic competitive case, the optimal tax equals the Pigou rate, equivalent to the present discounted value of marginal damage costs. We consider two separate types of tenure insecurity for resource owners, and their impact on the tax implementing the optimal policy. When insecure control is with respect to future ownership to the resource, competitive extraction is higher than otherwise, and the efficiency-implementing tax exceeds the Pigou rate. When tenure insecurity instead implies possible expropriation ("holdup") of investment in extraction capacity, it deters extraction, and the optimal tax is lower than the Pigou rate.
format	Journal Article
author	Strand, Jon
author_facet	Strand, Jon
author_sort	Strand, Jon
title	Optimal Fossil-Fuel Taxation with Backstop Technologies and Tenure Risk
title_short	Optimal Fossil-Fuel Taxation with Backstop Technologies and Tenure Risk
title_full	Optimal Fossil-Fuel Taxation with Backstop Technologies and Tenure Risk
title_fullStr	Optimal Fossil-Fuel Taxation with Backstop Technologies and Tenure Risk
title_full_unstemmed	Optimal Fossil-Fuel Taxation with Backstop Technologies and Tenure Risk
title_sort	optimal fossil-fuel taxation with backstop technologies and tenure risk
publishDate	2012
url	http://hdl.handle.net/10986/4964
_version_	1764393417806184448

Optimal Fossil-Fuel Taxation with Backstop Technologies and Tenure Risk

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