Taxing Fossil Fuels under Speculative Storage

Semih Tumen, Deren Ünalmış, Ibrahim Unalmis and Filiz Unsal

Working Papers from Research and Monetary Policy Department, Central Bank of the Republic of Turkey

Abstract: This paper investigates the mechanisms through which environmental taxes on fossil fuel usage can affect the main macroeconomic variables in the short-run. We concentrate on a particular mechanism : speculative storage. The existence of forward-looking speculators in the model improves the effectiveness of tax policies in reducing fossil fuel usage. Improved policy effectiveness, however, is costly : it drives inflation and interest rates up, while impeding output. Based on this tradeoff, we seek an answer to the question how monetary policy should interact with environmental tax policies in our DSGE model of fossil fuel storage.

Keywords: Fossil fuel; Environmental taxes; Speculative storage; DSGE (search for similar items in EconPapers)
JEL-codes: E31 E52 H23 O44 (search for similar items in EconPapers)
Date: 2015
New Economics Papers: this item is included in nep-dge, nep-ene, nep-env and nep-mac
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Citations: View citations in EconPapers (2)

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https://www.tcmb.gov.tr/wps/wcm/connect/EN/TCMB+EN ... g+Paperss/2015/15-02 (application/pdf)

Related works:
Journal Article: Taxing fossil fuels under speculative storage (2016)
Working Paper: Taxing Fossil Fuels under Speculative Storage (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:tcb:wpaper:1502

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