Efficient Management of Insecure Fossil Fuel Imports Through Taxing (!) Domestic Green Energy?

A small open economy produces a consumer good along with green and black energy and imports fossil fuel for black-energy production at an uncertain world market price. Efficient risk management requires curbing fuel consumption, and hence carbon emissions, when consumers are prudent. Moreover, if consumer preferences display constant absolute risk aversion (implying prudence), an efficient response to increasing risk is promoting green energy and reducing total energy production. Unregulated competitive markets are inefficient when consumers are risk averse. With the plausible assumption of prudent consumers and risk neutral producers, taxing both fossil fuel and green energy restores efficiency.

• Publication year

  2010

• Venue

  Social Science Research Network

• Publication date

  Unknown publication date

• Fields of study

  Economics, Environmental Science

• Identifiers
  DOI 10.2139/ssrn.1618227
• External record

  Open on Semantic Scholar

• Source metadata

  Semantic Scholar

• No claims are published for this paper.

• No concepts are published for this paper.

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