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The optimal fuel and emission tax combination for life-cycle emissions under imperfect competition

Author

Listed:
  • Hiroaki Ino

    (School of Economics, Kwansei Gakuin University)

  • Toshihiro Matsumura

    (Institute of Social Science, The University of Tokyo)

Abstract

This study examines the optimal combination of emission and fuel taxes for reducing greenhouse gas emissions in a monopoly market. Greenhouse gases are emitted during both production and consumption stages (life-cycle emissions). We present two cases in which a government should impose an additional strictly positive fuel tax, even when an optimal emission tax is introduced: the case of consumers selecting the fuel consumption and case of a producer selecting fuel efficiency endogenously. The results imply that a government may maintain fuel taxes even after introducing an effective emission tax and be able to construct a socially desirable tax structure by using existing taxes.

Suggested Citation

  • Hiroaki Ino & Toshihiro Matsumura, 2023. "The optimal fuel and emission tax combination for life-cycle emissions under imperfect competition," Discussion Paper Series 243, School of Economics, Kwansei Gakuin University, revised Apr 2023.
    • Handle: RePEc:kgu:wpaper:243
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    File URL: http://192.218.163.163/RePEc/pdf/kgdp243.pdf
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    References listed on IDEAS

    as
    1. Lee, Sang-Ho, 1999. "Optimal Taxation for Polluting Oligopolists with Endogenous Market Structure," Journal of Regulatory Economics, Springer, vol. 15(3), pages 293-308, May.
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    4. Christoph Böhringer & Carolyn Fischer & Nicholas Rivers, 2023. "Intensity-Based Rebating of Emission Pricing Revenues," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 10(4), pages 1059-1089.
    5. R. Simpson, 1995. "Optimal pollution taxation in a Cournot duopoly," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 6(4), pages 359-369, December.
    6. A. Michael Spence, 1975. "Monopoly, Quality, and Regulation," Bell Journal of Economics, The RAND Corporation, vol. 6(2), pages 417-429, Autumn.
    7. World Bank & Ecofys & Vivid Economics, "undated". "State and Trends of Carbon Pricing 2017," World Bank Publications - Reports 28510, The World Bank Group.
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    More about this item

    Keywords

    fuel tax; emission tax; carbon pricing; heterogeneous consumers; vehicle industry;
    All these keywords.

    JEL classification:

    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation

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