Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/38923
Authors: 
Eichner, Thomas
Pethig, Rüdiger
Year of Publication: 
2010
Series/Report no.: 
CESifo working paper Energy and Climate Economics 3062
Abstract: 
A small open economy produces a consumer good, green and black energy, and imports fossil fuel at an uncertain price. Unregulated competitive markets are shown to be inefficient. The implied market failures are due to the agents' attitudes toward risk, to risk shifting and the uniform price for both types of energy. Under the plausible assumptions that consumers are prudent and at least as risk averse as the producers of black energy, the risk can be efficiently managed by taxing emissions and green energy. The need to tax (!) green energy contradicts the widespread view that subsidization of green energy is an appropriate means to enhance energy security in countries depending on risky fossil fuel imports.
Subjects: 
price uncertainty
black energy
green energy
fossil fuel
JEL: 
F18
Q42
Q48
Document Type: 
Working Paper

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