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Why Tax Energy? Towards a More Rational Energy Policy

David M Newbery ()

Cambridge Working Papers in Economics from Faculty of Economics, University of Cambridge

Abstract: The same fuels are taxed at widely different rates in different countries while different fuels are taxed at widely different rates within and across countries. Coal, oil and gas are all used to generate electricity, but are subject to very different tax or subsidy regimes. This paper considers what tax theory has to say about efficient energy tax design. The main factors for energy taxes are the optimal tariff argument, the need to correct externalities such as global warming, and second-best considerations for taxing transport fuels as road charges, but these are inadequate to explain current energy taxes. EU energy tax harmonisation and Kyoto suggest that the time is ripe to reform energy taxation.

Keywords: tax; energy; oil; optimal tariff; externalities; exhaustible resources; global warming; road charges (search for similar items in EconPapers)
JEL-codes: Q4 Q48 H21 H23 L71 R48 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ene, nep-env, nep-geo, nep-pbe and nep-res
Date: 2005-01
Note: CMI, IO
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (20) Track citations by RSS feed

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