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

Julien Daubanes ()

Economics Bulletin, 2008, vol. 17, issue 13, pages 1-11

Abstract: 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.

Keywords: Exhaustible resources; Atmospheric pollution; Imperfect competition; Optimal taxation; Cost of regulation (search for similar items in EconPapers)
JEL-codes: Q3 H2 (search for similar items in EconPapers)
Date: 2008-07-16
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Working Paper: Fossil fuels supplied by oligopolies: On optimal taxation and rent capture (2007)
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Persistent link: http://EconPapers.repec.org/RePEc:ebl:ecbull:v:17:y:2008:i:13:p:1-11

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