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Environmentally Responsible Energy Pricing

This paper assesses the value of the non-global warming externalities associated with energy use. The estimates of the full social cost energy prices based on this "no regrets" approach imply environmental costs that often greatly exceed current tax amounts. The midpoint estimates suggest that the price of coaI is most out of line with its efficient level. Natural gas is currently overtaxed, and gasoline is appropriately taxed. There is also a substantial range of uncertainty embodied in the no regrets estimates.

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Energy Specializations: Petroleum – Markets and Prices for Crude Oil and Products; Natural Gas – Markets and Prices; Energy and the Environment – Policy and Regulation

JEL Codes:
L13 - Oligopoly and Other Imperfect Markets
E60 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook: General

Keywords: Environmental protection, Energy pricing, Taxes, Climate change, Externalities

DOI: 10.5547/ISSN0195-6574-EJ-Vol15-No2-2

Published in Volume15, Number 2 of The Quarterly Journal of the IAEE's Energy Economics Education Foundation.