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Why Tax Energy? Towards a More Rational Policy

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  • David M. Newbery

Abstract

The same fuels are taxed at widely different rates in different countries while different fuels are taxed at widely different rates within and across countries. This paper considers what tax theory has to say about efficient energy tax design. The main factors for energy taxes are the optimal tariff argument, the need to correct externalities such as global warming, and second-best considerations for taxing transport fuels as road charges, but these are inadequate to explain current energy taxes. EU energy tax harmonisation and Kyoto suggest that the time is ripe to reform energy taxation.

Suggested Citation

  • David M. Newbery, 2005. "Why Tax Energy? Towards a More Rational Policy," The Energy Journal, , vol. 26(3), pages 1-39, July.
    • Handle: RePEc:sae:enejou:v:26:y:2005:i:3:p:1-39
    DOI: 10.5547/ISSN0195-6574-EJ-Vol26-No3-1
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    References listed on IDEAS

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    1. Farzin, Y H & Tahvonen, O, 1996. "Global Carbon Cycle and the Optimal Time Path of a Carbon Tax," Oxford Economic Papers, Oxford University Press, vol. 48(4), pages 515-536, October.
    2. Newbery, David M, 1990. "Pricing and Congestion: Economic Principles Relevant to Pricing Roads," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 6(2), pages 22-38, Summer.
    3. David M Newbery, 1992. "Should Carbon Taxes Be Additional to Other Transport Fuel Taxes?," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2), pages 49-60.
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