Taxation of nuclear rents: Benefits, drawbacks, and alternatives

J. Morbee, P. Himpens and Stef Proost

Energy Economics, 2015, vol. 51, issue C, 622-632

Abstract: This paper studies the taxation of nuclear energy using a stylized model of the electricity sector, with one dominant nuclear producer and a competitive fringe of non-nuclear plants. First, we find that the optimal nuclear tax is different depending on the time horizon: the optimal short-run tax has the same order of magnitude as the nuclear taxes imposed in Belgium and Germany, while in the long run the optimal tax may be negative, i.e. a subsidy. Second, government credibility is important: when a government cannot credibly commit, the mere possibility of a short-run tax could severely harm incentives for future investments in lifetime-extending refurbishment or new plants. Third, when there is natural scarcity in nuclear potential, other policies like inviting multiple competitive bidders for lifetime extension franchises or for investments in new plants, may be more efficient ways to increase government revenue.

Keywords: Electricity market; Nuclear rent; Taxation; Lifetime extension; Investment (search for similar items in EconPapers)
JEL-codes: H25 L12 Q41 Q48 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (1)

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Related works:
Working Paper: Taxation of nuclear rents: benfits, drawbacks and alternatives (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:51:y:2015:i:c:p:622-632

DOI: 10.1016/j.eneco.2015.06.007

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