Efficient management of insecure fossil fuel imports through taxing (!) domestic green energy?

Thomas Eichner and Rüdiger Pethig

Volkswirtschaftliche Diskussionsbeiträge from Universität Siegen, Fakultät Wirtschaftswissenschaften, Wirtschaftsinformatik und Wirtschaftsrecht

Abstract: A small open economy produces a consumer good along with green and black energy and imports fossil fuel for black-energy production at an uncertain world market price. Efficient risk management requires curbing fuel consumption, and hence carbon emissions, when consumers are prudent. Moreover, if consumer preferences display constant absolute risk aversion (implying prudence), an efficient response to increasing risk is promoting green energy and reducing total energy production. Unregulated competitive markets are inefficient when consumers are risk averse. With the plausible assumption of prudent consumers and risk neutral producers, taxing both fossil fuel and green energy restores efficiency.

Keywords: Price uncertainty; black energy; green energy; fossil fuel (search for similar items in EconPapers)
JEL-codes: F18 Q42 Q48 (search for similar items in EconPapers)
Pages: 21 pages
Date: 2009
New Economics Papers: this item is included in nep-ene and nep-env
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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http://www.wiwi.uni-siegen.de/vwl/repec/sie/papers/138-09.pdf (application/pdf)

Related works:
Journal Article: Efficient Management of Insecure Fossil Fuel Imports through Taxing Domestic Green Energy? (2015)
Working Paper: Efficient Management of Insecure Fossil Fuel Imports through Taxing (!) Domestic Green Energy? (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:sie:siegen:138-09

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