Prices vs. quantities in a dynamic problem: Externalities from resource extraction
►The paper considers a resource extraction problem with a flow externality. ► A tax policy can induce the first best when extraction choices are interior. ► Quantity policies cannot be similarly designed. ► The tax policy is not robust to all boundary solutions. This paper shows how a stationary tax...
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| Veröffentlicht in: | Resource and energy economics 2011-11, Vol.33 (4), p.843-854 |
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| creator | Briggs, R.J. |
| description | ►The paper considers a resource extraction problem with a flow externality. ► A tax policy can induce the first best when extraction choices are interior. ► Quantity policies cannot be similarly designed. ► The tax policy is not robust to all boundary solutions.
This paper shows how a stationary tax policy can optimally address a flow externality associated with resource extraction when the policymaker faces asymmetric information. In the model I consider, the policymaker must set policy in each period before the realization of a price shock. Resource owners then learn the value of the shock, and the owners choose extraction quantities. The optimal policy is a stationary tax rule that responds to a positive shock to the current price by reducing next period's tax rate. Intuitively, a reduction in next period's tax rate makes extraction next period less expensive and thus dampens the resource owner's current response to a price increase. This policy is robust to some, but not necessarily all, boundary solutions. |
| doi_str_mv | 10.1016/j.reseneeco.2011.06.001 |
| format | Article |
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This paper shows how a stationary tax policy can optimally address a flow externality associated with resource extraction when the policymaker faces asymmetric information. In the model I consider, the policymaker must set policy in each period before the realization of a price shock. Resource owners then learn the value of the shock, and the owners choose extraction quantities. The optimal policy is a stationary tax rule that responds to a positive shock to the current price by reducing next period's tax rate. Intuitively, a reduction in next period's tax rate makes extraction next period less expensive and thus dampens the resource owner's current response to a price increase. This policy is robust to some, but not necessarily all, boundary solutions.</description><subject>Applied sciences</subject><subject>Asymmetric information</subject><subject>Asymmetry</subject><subject>Boundaries</subject><subject>Choice of instruments</subject><subject>Dynamics</subject><subject>Economic data</subject><subject>Economic models</subject><subject>Economics</subject><subject>Energy</subject><subject>Energy economics</subject><subject>Energy policy</subject><subject>Environmental policy</subject><subject>Environmental policy Resource policy Choice of instruments Asymmetric information Non-renewable resources Prices vs. quantities Taxes Permits Uncertainty</subject><subject>Exact sciences and technology</subject><subject>Externalities</subject><subject>Externality</subject><subject>Extraction</subject><subject>Fiscal policy</subject><subject>Fossil fuels and derived products</subject><subject>General aspects</subject><subject>General, economic and professional 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This paper shows how a stationary tax policy can optimally address a flow externality associated with resource extraction when the policymaker faces asymmetric information. In the model I consider, the policymaker must set policy in each period before the realization of a price shock. Resource owners then learn the value of the shock, and the owners choose extraction quantities. The optimal policy is a stationary tax rule that responds to a positive shock to the current price by reducing next period's tax rate. Intuitively, a reduction in next period's tax rate makes extraction next period less expensive and thus dampens the resource owner's current response to a price increase. This policy is robust to some, but not necessarily all, boundary solutions.</abstract><cop>Amsterdam</cop><pub>Elsevier B.V</pub><doi>10.1016/j.reseneeco.2011.06.001</doi><tpages>12</tpages></addata></record> |
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| identifier | ISSN: 0928-7655 |
| ispartof | Resource and energy economics, 2011-11, Vol.33 (4), p.843-854 |
| issn | 0928-7655 1873-0221 |
| language | eng |
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| source | RePEc; Elsevier ScienceDirect Journals |
| subjects | Applied sciences Asymmetric information Asymmetry Boundaries Choice of instruments Dynamics Economic data Economic models Economics Energy Energy economics Energy policy Environmental policy Environmental policy Resource policy Choice of instruments Asymmetric information Non-renewable resources Prices vs. quantities Taxes Permits Uncertainty Exact sciences and technology Externalities Externality Extraction Fiscal policy Fossil fuels and derived products General aspects General, economic and professional studies Natural resources Non-renewable resources Optimization Permits Policies Prices vs. quantities Resource policy Studies Tax rates Taxes Uncertainty |
| title | Prices vs. quantities in a dynamic problem: Externalities from resource extraction |
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