Designing fiscal policy to address the external costs of energy (IMF)

This IMF working paper reviews the conceptual case for, and appropriate design of, fiscal policies to address major externalities associated with energy use (global warming, local air pollution, congestion etc) from motor vehicles. It describes techniques for (roughly) estimating the magnitude of these externalities, and provides corrective energy taxes, on a country-by country basis. Finally, it discusses the implications for reforming energy taxes, and the potential environmental, health, and fiscal benefits from reform.