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Firm-level Estimates of Fuel Substitution: An Application to Carbon Pricing

Marie Hyland and Stefanie Haller

Year: 2018
Volume: Volume 39
Number: Number 6
DOI: 10.5547/01956574.39.6.mhyl
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Abstract:
We estimate partial and total own and cross price elasticities between electricity, gas and oil, using firm-level data. We find that, based on the partial elasticity measure, electricity is the least-responsive fuel to changes in its own price and in the price of other fuels. The total elasticity measure, which adjusts the partial elasticity for changes in aggregate energy demand induced by individual fuel price changes, reveals that the demand for electricity is much more price responsive than the partial elasticity suggests. Our results illustrate the importance of accounting for the feedback effect between interfactor and interfuel elasticities when considering the effectiveness of environmental taxation. We use the estimated elasticities to simulate the impact of a �15/tCO2 carbon tax on average energy-related CO2 emissions. The carbon tax results in a small reduction in CO2 emissions from oil and gas use, but this reduction is partially offset by an increase in emissions due to increased electricity consumption by some firms.



Efficient Combination of Taxes on Fuel and Vehicles

Geir H. M. Bjertnæs

Year: 2019
Volume: Volume 40
Number: The New Era of Energy Transition
DOI: 10.5547/01956574.40.SI1.gbje
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Abstract:
A tax on fuel combined with tax exemptions or subsidies for fuel-efficient vehicles is implemented in many countries to reduce greenhouse gas emissions and other negative externalities from road traffic. This study, however, shows that a tax on fuel should be combined with heavier taxation of fuel-efficient vehicles to curb externalities from road traffic. The tax on fuel is implemented in order to curb externalities linked to both consumption of fuel and road use. A heavier tax on fuel-efficient vehicles prevent motorists from avoiding the road user charge on fuel by purchasing fuel-efficient vehicles.





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