Energy Crisis vs. Energy Self-Sufficiency: Optimal Policy with Firms Investment Behavior

After the conflict in Ukraine, choosing the best course of action for ensuring the nation’s energy independence from imports can be seen as balancing geopolitics in the larger world. The study demonstrates that nations can achieve energy self-sufficiency if the price of oil is high enough to encourage businesses to switch to alternate energy sources. In order to achieve energy independence in the face of competing markets, scarce resources, and alternative energy sources (oil-saving technology), the research introduces an oil tax (to raise oil prices). The policy instrument outlines the changes the German government will make to gas sources in order to cut back on Russian gas imports. The report also compares various static scenarios in which the regulator acts first (or not) in relation to the firms. There are several possible equilibriums, but only one is socially optimal. The study demonstrates that taxation influences the adoption of various energy-saving technologies, and as a result, the total amount of oil is reduced due to the adoption of alternative sources, which is a requirement for energy self-sufficiency.

Author(s) Details:

Emanuela Giusi Gaeta,
Italian Treasury Department, Ministry of Economic and Finance, Italy.

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Keywords: Energy self-sufficiency, environmental policies, fiscal policies, technological change, energy saving, welfare analysis

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