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On the Optimal Taxation of an Exhaustible Resource Under Monopolistic Extraction

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  • Daubanes, J.

Abstract

In a simple model of resource depletion (isoelastic demand and constant unit extraction cost), we fully characterize the set of linear effiency-inducing tax/subsidy schemes. We show that this set is infinite and all the larger as the cost of extraction is low. Depending on the magnitude of the latter, we show that there may exist optimal linear strict taxes, thus allowing the regulator to induce efficiency without subsidizing the mine industry at any date. We illustrate and argue that the exhaustibility constraint the monopolist extractor faces can be exploited by the regulator to relax the standard trade-off between inducing efficiency and raising revenues from the monopoly.
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Suggested Citation

  • Daubanes, J., 2007. "On the Optimal Taxation of an Exhaustible Resource Under Monopolistic Extraction," Other publications TiSEM a710e412-e84f-4b33-a0af-a, Tilburg University, School of Economics and Management.
    • Handle: RePEc:tiu:tiutis:a710e412-e84f-4b33-a0af-a58dd2423303
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    References listed on IDEAS

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    1. Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, April.
    2. Lewis, Tracy R & Matthews, Steven A & Burness, H Stuart, 1979. "Monopoly and the Rate of Extraction of Exhaustible Resources: Note," American Economic Review, American Economic Association, vol. 69(1), pages 227-230, March.
    3. Benchekroun, Hassan & Van Long, Ngo, 2002. "On the multiplicity of efficiency-inducing tax rules," Economics Letters, Elsevier, vol. 76(3), pages 331-336, August.
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    6. Benchekroun, Hassan & van Long, Ngo, 1998. "Efficiency inducing taxation for polluting oligopolists," Journal of Public Economics, Elsevier, vol. 70(2), pages 325-342, November.
    7. Harold Hotelling, 1931. "The Economics of Exhaustible Resources," Journal of Political Economy, University of Chicago Press, vol. 39(2), pages 137-137.
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    10. Sinclair, P.J.N., 1994. "On the Optimum Trend of Fossil Fuel Taxation," Discussion Papers 94-16, Department of Economics, University of Birmingham.
    11. Bergstrom, Theodore C. & Cross, John G. & Porter, Richard C., 1981. "Efficiency-inducing taxation for a monopolistically supplied depletable resource," Journal of Public Economics, Elsevier, vol. 15(1), pages 23-32, February.
    12. Villamor Gamponia & Robert Mendelsohn, 1985. "The Taxation of Exhaustible Resources," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 100(1), pages 165-181.
    13. DAUBANES Julien & GRIMAUD André, 2006. "On the North-South Effects of Environmental Policy: Rent Transfers, Relocation and Growth," LERNA Working Papers 06.26.219, LERNA, University of Toulouse.
    14. Sinclair, Peter J N, 1994. "On the Optimum Trend of Fossil Fuel Taxation," Oxford Economic Papers, Oxford University Press, vol. 46(0), pages 869-877, Supplemen.
    15. Karp, Larry & Livernois, John, 1992. "On efficiency-inducing taxation for a non-renewable resource monopolist," Journal of Public Economics, Elsevier, vol. 49(2), pages 219-239, November.
    16. Im, Jeong-Bin, 2002. "Optimal taxation of exhaustible resource under monopoly," Energy Economics, Elsevier, vol. 24(3), pages 183-197, May.
    17. Yucel, Mine Kuban, 1989. "Severance taxes and market structure in an exhaustible resource industry," Journal of Environmental Economics and Management, Elsevier, vol. 16(2), pages 134-148, March.
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    Cited by:

    1. Julien Daubanes, 2008. "Fossil fuels supplied by oligopolies: On optimal taxation and rent capture," Economics Bulletin, AccessEcon, vol. 17(13), pages 1-11.
    2. repec:ebl:ecbull:v:17:y:2008:i:13:p:1-11 is not listed on IDEAS
    3. DAUBANES Julien, 2009. "Changement climatique, instruments économiques et propositions pour un accord post-Kyoto : une synthèse," LERNA Working Papers 09.19.295, LERNA, University of Toulouse.

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    More about this item

    JEL classification:

    • Q30 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - General
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation

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