Energy Taxes and oil price shocks

Helmuth Cremer, Firouz Gahvari, Norbert Ladoux

Research output: Contribution to journalArticlepeer-review

Abstract

This paper examines if an energy price shock should be compensated by a reduction in energy taxes to mitigate its impact on consumer prices. It shows that the consumer price should not increase by as much as the producer price, implying a small reduction in the energy tax in dollars. The energy tax rate, on the other hand, decreases sharply. This decline is primarily due to an adjustment in the Pigouvian component: A constant marginal social damage being divided by a higher producer price. The redistributive component of the tax remains at about 10% of the social cost of energy.

Original languageEnglish (US)
Pages (from-to)475-501
Number of pages27
JournalB.E. Journal of Economic Analysis and Policy
Volume15
Issue number2
DOIs
StatePublished - Apr 1 2015

Keywords

  • Energy tax
  • Oil price shock
  • Pigouvian tax
  • Redistributive concerns

ASJC Scopus subject areas

  • Economics and Econometrics
  • Economics, Econometrics and Finance (miscellaneous)

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