ABSTRACT

The price of energy to its final user is a key determinant of the demand for its use. The price of carbon-based fuels - coal, oil and gas - is therefore an important influence on emissions of carbon dioxide. Governments can exert influence on the prices produced by the market in a number of ways: through increasing competition by market liberalization, by providing or removing subsidies for energy production or consumption, and by applying taxation (based on energy, carbon content or a mixture of both). All these actions can also have impacts (real or perceived) on the international competitiveness of business in the country in question (see Chapter 2) and specific policy instruments may be applied to mitigate any such negative impacts. This chapter examines these issues and their interaction with the multilateral trading system.