Title: Energy taxes and subsidies: their implications for CO₂ emissions and abatement costs

Authors: Rosemary Clarke

Addresses: Dept of Economics, University of Birmingham, Birmingham B15 2TT, UK

Abstract: Energy markets are often distorted, with the result that price does not equal the marginal social cost of production. Subsidies encourage consumption of energy and impose welfare losses independent of those arising from global warming. Fossil fuels, especially oil, are already taxed in many countries. The superimposition of a carbon tax on existing taxes could greatly increase the welfare loss from taxation if such taxes do not reflect externalities or user costs. Moreover, existing taxes affect relative fuel prices and may raise emission levels. The removal of subsidies and the restructuring of taxes so that fuel prices are brought into line with marginal social costs could result in emission abatement and lower abatement costs.

Keywords: abatement costs; carbon dioxide; greenhouse gases; GHG emissions; carbon tax; energy taxes; OECD; Rio; subsidies; targets; welfare costs; fuel prices; energy taxes.

DOI: 10.1504/IJEP.1993.028511

International Journal of Environment and Pollution, 1993 Vol.3 No.1/2/3, pp.168 - 178

Published online: 18 Sep 2009 *

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