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Energy Taxes and Oil Price Shocks

Author

Listed:
  • Cremer Helmuth

    (Toulouse School of Economics, IDEI, GREMAQ and Institut Universitaire de France, Toulouse, France)

  • Gahvari Firouz

    (Department of Economics, University of Illinois at Urbana-Champaign, Urbana, IL 61801, USA)

  • Ladoux Norbert

    (Toulouse School of Economics, IDEI and LERNA, Toulouse, France)

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.

Suggested Citation

  • Cremer Helmuth & Gahvari Firouz & Ladoux Norbert, 2015. "Energy Taxes and Oil Price Shocks," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 15(2), pages 475-501, April.
    • Handle: RePEc:bpj:bejeap:v:15:y:2015:i:2:p:475-501:n:15
    DOI: 10.1515/bejeap-2014-0098
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    References listed on IDEAS

    as
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    Citations

    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Using energy taxes to dampen energy price fluctuations
      by Economic Logician in Economic Logic on 2011-10-19 20:24:00

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    Cited by:

    1. Chen, Zi-yue & Nie, Pu-yan, 2016. "Effects of carbon tax on social welfare: A case study of China," Applied Energy, Elsevier, vol. 183(C), pages 1607-1615.
    2. Ladoux, Norbert & Scasny, Milan, 2014. "Energy Price and Redistribution in Czech Republic," TSE Working Papers 14-527, Toulouse School of Economics (TSE).
    3. Philippe Bontems & Estelle Gozlan, 2018. "Trade, environment, and income inequality: An optimal taxation approach," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 20(4), pages 557-581, August.

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    More about this item

    Keywords

    oil price shock; energy tax; Pigouvian tax; redistributive concerns;
    All these keywords.

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies

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