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On The Path Of An Oil Pigovian Tax

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  • ANTOINE BELGODERE

Abstract

This paper studies optimal climate policy in the presence of oil rents. Several authors have found that, according to Hotelling's rule, in the long run, the optimal ad valorem tax must decrease. However, if the pollution is a stock and if environmental concerns impose stopping the resource extraction before its exhaustion, we show that an ad valorem tax defined over the rent cannot decentralize the optimum. In this case, an increasing per‐unit tax can decentralize the optimum. Such a tax implies the disappearance of the Hotelling rent. Thus, the extraction problem reduces to a pollution‐control problem.

Suggested Citation

  • Antoine Belgodere, 2009. "On The Path Of An Oil Pigovian Tax," Manchester School, University of Manchester, vol. 77(5), pages 632-649, September.
    • Handle: RePEc:bla:manchs:v:77:y:2009:i:5:p:632-649
    DOI: 10.1111/j.1467-9957.2009.02115.x
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    1. Julien Daubanes & André Grimaud, 2010. "Taxation of a Polluting Non-renewable Resource in the Heterogeneous World," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 47(4), pages 567-588, December.
    2. Calvo, Jorge Andrés Perdomo & Pérez, Ana María Jaramillo, 2016. "Optimal extraction policy when the environmental and social costs of the opencast coal mining activity are internalized: Mining District of the Department of El Cesar (Colombia) case study," Energy Economics, Elsevier, vol. 59(C), pages 159-166.
    3. Tomoyuki Sakamoto & Shunsuke Managi, 2016. "Optimal economic growth and energy policy: analysis of nonrenewable and renewable energy," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 18(1), pages 1-19, January.
    4. VARDAR, N. Baris, 2014. "Optimal energy transition and taxation of non-renewable resources," LIDAM Discussion Papers CORE 2014021, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    5. Vardar, N. Baris, 2024. "Optimal taxation of nonrenewable resources during clean energy transition: A general equilibrium approach," Mathematical Social Sciences, Elsevier, vol. 130(C), pages 10-23.

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