Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/41091
Authors: 
Eichner, Thomas
Pethig, Rüdiger
Year of Publication: 
2009
Series/Report no.: 
Volkswirtschaftliche Diskussionsbeiträge // Universität Siegen, Fachbereich Wirtschaftswissenschaften, Wirtschaftsinformatik und Wirtschaftsrecht 138
Abstract: 
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.
Subjects: 
price uncertainty
black energy
green energy
fossil fuel
JEL: 
F18
Q42
Q48
Document Type: 
Working Paper

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