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Optimal energy transition and taxation of non-renewable resources

Authors: VARDAR, N. Baris;

Optimal energy transition and taxation of non-renewable resources

Abstract

This paper investigates the optimal taxation path of a non-renewable resource in the presence of an imperfect substitute renewable resource. We present an optimal growth model and characterize the social optimum and the decentralized equilibrium. We show that the economy gradually reduces the share of non-renewable resource and converges to a steady state in which it uses only the renewable resource. The decentralized economy converges to the same steady state as the social optimum in terms of capital stock and consumption whether there is a regulator intervention or not. What matters for welfare, however, is the speed at which the economy approaches the clean state - the energy transition, which determines the level of environmental damages. We obtain the optimal taxation rule and show that its time profile can be either always increasing, decreasing or U-shaped depending on the initial state of the economy. Finally we provide some simulation results to illustrate these theoretical findings.

Country
Belgium
Keywords

optimal taxation, simultaneous resource use, energy, optimal taxation, non-renewable resource, renewable resource, imperfect substitution, simultaneous resource use, renewable resource, non-renewable resource, imperfect substitution, energy, jel: jel:Q43, jel: jel:Q20, jel: jel:Q30, jel: jel:Q38

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selected citations
These citations are derived from selected sources.
This is an alternative to the "Influence" indicator, which also reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically).
BIP!Citations provided by BIP!
popularity
This indicator reflects the "current" impact/attention (the "hype") of an article in the research community at large, based on the underlying citation network.
BIP!Popularity provided by BIP!
influence
This indicator reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically).
BIP!Influence provided by BIP!
impulse
This indicator reflects the initial momentum of an article directly after its publication, based on the underlying citation network.
BIP!Impulse provided by BIP!
0
Average
Average
Average
Green