Resource Rent Taxation and Benchmarking – A New Perspective for the Swiss Hydropower Sector

Massimo Filippini and Silvia Banfi ()
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Silvia Banfi: Center for Energy Policy and Economics CEPE, Department of Management, Technology and Economics, ETH Zurich, Switzerland

No 09-67, CEPE Working paper series from CEPE Center for Energy Policy and Economics, ETH Zurich

Abstract: The electricity generation in Switzerland is mainly based on hydropower (55% of total production). The exploitation of water in the hydropower sector can generate significant so-called resource rents. These are defined by the surplus return above the value of capital, labor, materials and energy used to exploit hydropower. In Switzerland, hydropower producers pay to the State a fixed fee per kW gross capacity. With this system the substantial differences in costs, revenues and in the production characteristics of the hydropower plants are not taken into account. In this context, the following paper has two main goals: 1) To discuss the introduction in the Swiss hydropower sector of a new payment system based on a resource rent tax; 2) To propose a combination of a RRT system with a benchmarking analysis of the production cost obtained through the estimation of a stochastic frontier variable cost function. We estimate a true random effects stochastic frontier variable cost function using panel data in order to overcome the asymmetric information problem. In addition, using the information on cost efficiency of the single companies, we show how to introduce in the RRT scheme a benchmark system which gives incentives to minimize the production costs.

Keywords: Resource Rent Taxation; Hydropower; Efficiency (search for similar items in EconPapers)
Pages: 21 pages
Date: 2009-08
New Economics Papers: this item is included in nep-ene
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Resource rent taxation and benchmarking--A new perspective for the Swiss hydropower sector (2010)
Working Paper: Resource Rent Taxation and Benchmarking.A New Perspective for the Swiss Hydropower Sector (2009)
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