The optimal fuel and emission tax combination for life-cycle emissions under imperfect competition

Hiroaki Ino and Toshihiro Matsumura

No 243, Discussion Paper Series from School of Economics, Kwansei Gakuin University

Abstract: This study examines the optimal combination of emission and fuel taxes for reducing greenhouse gas emissions in a monopoly market. Greenhouse gases are emitted during both production and consumption stages (life-cycle emissions). We present two cases in which a government should impose an additional strictly positive fuel tax, even when an optimal emission tax is introduced: the case of consumers selecting the fuel consumption and case of a producer selecting fuel efficiency endogenously. The results imply that a government may maintain fuel taxes even after introducing an effective emission tax and be able to construct a socially desirable tax structure by using existing taxes.

Keywords: fuel tax; emission tax; carbon pricing; heterogeneous consumers; vehicle industry (search for similar items in EconPapers)
JEL-codes: H23 L51 Q48 Q58 (search for similar items in EconPapers)
Pages: 22 pages
Date: 2023-01, Revised 2023-04
New Economics Papers: this item is included in nep-ene, nep-env, nep-pbe, nep-pub and nep-tre
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http://192.218.163.163/RePEc/pdf/kgdp243.pdf Revised version, 2023 (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:kgu:wpaper:243

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