Open AccessCarbon Tax on Three Fossil Fuels
Author(s) -
James Stodder
Publication year - 2019
Publication title -
weentech proceedings in energy
Language(s) - English
Resource type - Journals
ISSN - 2059-2353
DOI - 10.32438/wpe.7518
Subject(s) - carbon tax , natural gas , economics , fossil fuel , carbon footprint , greenhouse gas , natural resource economics , coal , environmental science , waste management , engineering , geology , oceanography
Carbon pricing will make Natural Gas the last fossil fuel. As is well-known, the carbon footprint of Oil is half-again as large, and the footprint of Coal is twice as large as that of Gas. Price sensitivities also imply that Gas producers bear relatively little of the total tax burden. As a result of the smaller tax on Gas, structured vector auto-regression (SVAR) simulations of a carbon tax show demand for Oil falling, with a rush for natural Gas. These simulations show that a modest ($40 per metric ton) carbon tax can be introduced gradually, avoiding price instability and achieving greater substitution into Gas than a tax ‘shock.’