Carbon Taxes, Oil Monopoly and Petrodollar Recycling

Arbeitspapier

We analyze the effects of an announced future carbon tax increase on the extraction behaviorof a monopolistic supplier of a scarce fossil energy resource like oil in a two country, two periodgeneral equilibrium model with symmetric and homothetic preferences and no extractioncosts. Based on the monopolist’s strategic consideration of the interplay between the resourceand the capital market, and especially of the effects of the extraction decision on the returnon petrodollar financed capital investments we identify and analyze a new channel for thereversal of the green paradox, a major concern regarding carbon taxation. We employ a numericalsimulation and a sensitivity analysis with regard to the model parameters to evaluatethe prevalence of such a reversal of the green paradox and find that it robustly arises undera wide range of reasonable parameter settings.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: ifo Working Paper ; No. 204

Classification and Topics

• Classification: Wirtschaft ; Micro-Based Behavioral Economics: General‡ ; Taxation, Subsidies, and Revenue: General ; Nonrenewable Resources and Conservation: Demand and Supply; Prices ; Nonrenewable Resources and Conservation: Government Policy
• Subject: green paradox ; monopoly ; fossil energy resources ; general equilibrium ; capital market

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Marz, Waldemar ; Pfeiffer, Johannes
• Event: Veröffentlichung
• (who): ifo Institute - Leibniz Institute for Economic Research at the University of Munich
• (where): Munich
• (when): 2015

Further information

• Handle: http://hdl.handle.net/10419/123112
• Last update: 10.03.2025, 11:43 AM CET