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The problem of optimal forest rotation in a nonstationary environment can, in general, not be solved analytically. Even qualitatively characterizing how the solution changes over time is only possible in some special cases. In this paper, we consider an approximation of the true solution to the nonstationary problem. We derive an approximate harvesting rule by solving a sequence of stationary problems that assume the growth conditions at that point in time will prevail indefinitely. Each such problem can be solved using the classic Faustmann rule. We numerically compare this approximate solution to the true solution, both in terms of the harvesting rule and the resulting expected profits, for a wide range of scenarios. We find that the harvesting rules are very similar (mostly <1% difference) and the profit losses associated with following the approximate rule are very small (less than 0.3%).

Following Russia's invasion of Ukraine, there has been a surge in transport fuel prices. Consequently, many European Union (EU) countries are cutting taxes on petrol and diesel to shield consumers. Using standard theory and empirical estimates, here we assess how such tax cuts influence the oil income in Russia. We find that an EU-wide tax cut of (sic)0.20 l(-1) increases Russia's oil profits by around (sic)8 million per day in the short and long term. This is equivalent to (sic)3,100 million per year, 0.2% of Russia's gross domestic product or 5% of its military spending. We show that a cash transfer to EU citizens-with a fiscal burden equivalent to the tax cut-reduces these side effects to a fraction.

European fuel tax cuts will lead to significant income transfers to Russia, thus undermining the Union’s sanction efforts against the country. EU politicians should instead consider alternative policies, such as direct income transfers to households, if they want to shield citizens from increased fuel prices without benefiting Russia.

Following Russia's invasion of Ukraine, there has been a surge in transport fuel prices. Consequently, many European Union (EU) countries are cutting taxes on petrol and diesel to shield consumers. Using standard theory and empirical estimates, here we assess how such tax cuts influence the oil income in Russia. We find that an EU-wide tax cut of (sic)0.20 l(-1) increases Russia's oil profits by around (sic)8 million per day in the short and long term. This is equivalent to (sic)3,100 million per year, 0.2% of Russia's gross domestic product or 5% of its military spending. We show that a cash transfer to EU citizens-with a fiscal burden equivalent to the tax cut-reduces these side effects to a fraction.

Following Russia's invasion of Ukraine, there has been a surge in transport fuel prices. Consequently, many European Union (EU) countries are cutting taxes on petrol and diesel to shield consumers. Using standard theory and empirical estimates, here we assess how such tax cuts influence the oil income in Russia. We find that an EU-wide tax cut of (sic)0.20 l(-1) increases Russia's oil profits by around (sic)8 million per day in the short and long term. This is equivalent to (sic)3,100 million per year, 0.2% of Russia's gross domestic product or 5% of its military spending. We show that a cash transfer to EU citizens-with a fiscal burden equivalent to the tax cut-reduces these side effects to a fraction.

Following Russia's invasion of Ukraine, there has been a surge in transport fuel prices. Consequently, many European Union (EU) countries are cutting taxes on petrol and diesel to shield consumers. Using standard theory and empirical estimates, here we assess how such tax cuts influence the oil income in Russia. We find that an EU-wide tax cut of (sic)0.20 l(-1) increases Russia's oil profits by around (sic)8 million per day in the short and long term. This is equivalent to (sic)3,100 million per year, 0.2% of Russia's gross domestic product or 5% of its military spending. We show that a cash transfer to EU citizens-with a fiscal burden equivalent to the tax cut-reduces these side effects to a fraction.

Following Russia's invasion of Ukraine, there has been a surge in transport fuel prices. Consequently, many European Union (EU) countries are cutting taxes on petrol and diesel to shield consumers. Using standard theory and empirical estimates, here we assess how such tax cuts influence the oil income in Russia. We find that an EU-wide tax cut of (sic)0.20 l(-1) increases Russia's oil profits by around (sic)8 million per day in the short and long term. This is equivalent to (sic)3,100 million per year, 0.2% of Russia's gross domestic product or 5% of its military spending. We show that a cash transfer to EU citizens-with a fiscal burden equivalent to the tax cut-reduces these side effects to a fraction.

Human activities are threatening to push the Earth system beyond its planetary boundaries, risking catastrophic and irreversible global environmental change. Action is urgently needed, yet well-intentioned policies designed to reduce pressure on a single boundary can lead, through economic linkages, to aggravation of other pressures. In particular, the potential policy spillovers from an increase in the global carbon price onto other critical Earth system processes has received little attention to date. To this end, we explore the global environmental effects of pricing carbon, beyond its effect on carbon emissions. We find that the case for carbon pricing globally becomes even stronger in a multi-boundary world, since it can ameliorate many other planetary pressures. It does however exacerbate certain planetary pressures, largely by stimulating additional biofuel production. When carbon pricing is allied with a biofuel policy, however, it can alleviate all planetary pressures.

The coronavirus pandemic has led many countries to initiate unprecedented economic recovery packages. Policymakers tackling the coronavirus crisis have also been encouraged to prioritize policies which help mitigate a second, looming crisis: climate change. We identify and analyze policies that combat both the coronavirus crisis and the climate crisis. We analyze both the long-run climate impacts from coronavirus-related economic recovery policies, and the impacts of long-run climate policies on economic recovery and public health post-recession. We base our analysis on data on emissions, employment and corona-related layoffs across sectors, and on previous research. We show that, among climate policies, labor-intensive green infrastructure projects, planting trees, and in particular pricing carbon coupled with reduced labor taxation boost economic recovery. Among coronavirus policies, aiding services sectors (leisure services such as restaurants and culture, or professional services such as technology), education and the healthcare sector appear most promising, being labor intensive yet low-emission-if such sectoral aid is conditioned on being directed towards employment and on low-carbon supply chains. Large-scale green infrastructure projects and green R&D investment, while good for the climate, are unlikely to generate enough employment to effectively alleviate the coronavirus crisis.

The coronavirus pandemic has led many countries to initiate unprecedented economic recovery packages. Policymakers tackling the coronavirus crisis have also been encouraged to prioritize policies which help mitigate a second, looming crisis: climate change. We identify and analyze policies that combat both the coronavirus crisis and the climate crisis. We analyze both the long-run climate impacts from coronavirus-related economic recovery policies, and the impacts of long-run climate policies on economic recovery and public health post-recession. We base our analysis on data on emissions, employment and corona-related layoffs across sectors, and on previous research. We show that, among climate policies, labor-intensive green infrastructure projects, planting trees, and in particular pricing carbon coupled with reduced labor taxation boost economic recovery. Among coronavirus policies, aiding services sectors (leisure services such as restaurants and culture, or professional services such as technology), education and the healthcare sector appear most promising, being labor intensive yet low-emission-if such sectoral aid is conditioned on being directed towards employment and on low-carbon supply chains. Large-scale green infrastructure projects and green R&D investment, while good for the climate, are unlikely to generate enough employment to effectively alleviate the coronavirus crisis.

Human activities are threatening to push the Earth system beyond its planetary boundaries, risking catastrophic and irreversible global environmental change. Action is urgently needed, yet well-intentioned policies designed to reduce pressure on a single boundary can lead, through economic linkages, to aggravation of other pressures. In particular, the potential policy spillovers from an increase in the global carbon price onto other critical Earth system processes has received little attention to date. To this end, we explore the global environmental effects of pricing carbon, beyond its effect on carbon emissions. We find that the case for carbon pricing globally becomes even stronger in a multi-boundary world, since it can ameliorate many other planetary pressures. It does however exacerbate certain planetary pressures, largely by stimulating additional biofuel production. When carbon pricing is allied with a biofuel policy, however, it can alleviate all planetary pressures.

Human activities are threatening to push the Earth system beyond its planetary boundaries, risking catastrophic and irreversible global environmental change. Action is urgently needed, yet well-intentioned policies designed to reduce pressure on a single boundary can lead, through economic linkages, to aggravation of other pressures. In particular, the potential policy spillovers from an increase in the global carbon price onto other critical Earth system processes has received little attention to date. To this end, we explore the global environmental effects of pricing carbon, beyond its effect on carbon emissions. We find that the case for carbon pricing globally becomes even stronger in a multi-boundary world, since it can ameliorate many other planetary pressures. It does however exacerbate certain planetary pressures, largely by stimulating additional biofuel production. When carbon pricing is allied with a biofuel policy, however, it can alleviate all planetary pressures.

Human activities are threatening to push the Earth system beyond its planetary boundaries, risking catastrophic and irreversible global environmental change. Action is urgently needed, yet well-intentioned policies designed to reduce pressure on a single boundary can lead, through economic linkages, to aggravation of other pressures. In particular, the potential policy spillovers from an increase in the global carbon price onto other critical Earth system processes has received little attention to date. To this end, we explore the global environmental effects of pricing carbon, beyond its effect on carbon emissions. We find that the case for carbon pricing globally becomes even stronger in a multi-boundary world, since it can ameliorate many other planetary pressures. It does however exacerbate certain planetary pressures, largely by stimulating additional biofuel production. When carbon pricing is allied with a biofuel policy, however, it can alleviate all planetary pressures.

Human activities are threatening to push the Earth system beyond its planetary boundaries, risking catastrophic and irreversible global environmental change. Action is urgently needed, yet well-intentioned policies designed to reduce pressure on a single boundary can lead, through economic linkages, to aggravation of other pressures. In particular, the potential policy spillovers from an increase in the global carbon price onto other critical Earth system processes has received little attention to date. To this end, we explore the global environmental effects of pricing carbon, beyond its effect on carbon emissions. We find that the case for carbon pricing globally becomes even stronger in a multi-boundary world, since it can ameliorate many other planetary pressures. It does however exacerbate certain planetary pressures, largely by stimulating additional biofuel production. When carbon pricing is allied with a biofuel policy, however, it can alleviate all planetary pressures.

Human activities are threatening to push the Earth system beyond its planetary boundaries, risking catastrophic and irreversible global environmental change. Action is urgently needed, yet well-intentioned policies designed to reduce pressure on a single boundary can lead, through economic linkages, to aggravation of other pressures. In particular, the potential policy spillovers from an increase in the global carbon price onto other critical Earth system processes has received little attention to date. To this end, we explore the global environmental effects of pricing carbon, beyond its effect on carbon emissions. We find that the case for carbon pricing globally becomes even stronger in a multi-boundary world, since it can ameliorate many other planetary pressures. It does however exacerbate certain planetary pressures, largely by stimulating additional biofuel production. When carbon pricing is allied with a biofuel policy, however, it can alleviate all planetary pressures.

Does international trade increase the risk of renewable-resource collapse? We show that the answer is affirmative if trade increases the variety of goods and the resource is harvested under open access. Then there is increased likelihood of collapse both as a steady-state outcome and following shocks to the stock. Two separate mechanisms underlie the results. (1) Trade gives resource harvesters access to new varieties of goods. To enable buying these goods, they exert more harvesting effort. (2) The resource constitutes a new variety for other countries, implying that the resource price increases with trade openness, especially when the stock is small, which makes the resource “exclusive.” Unlike in the existing literature, which predicts that trade cannot lead to collapse, each of our two mechanisms can cause collapse and they both increase the vulnerability to shocks. We present several examples of collapses that can plausibly be attributed to each of the mechanisms.

Financial actors such as international banks and investors play an important role in the global economy. This role is shifting due to financial innovations, increased sustainability ambitions from large financial actors, and changes in international commodity markets. These changes are creating new global connections that potentially make financial markets, actors, and instruments important aspects of global environmental change. Despite this, the way financial markets and actors affect ecosystem change in different parts of the world has seldom been elaborated in the literature. We summarize these financial trends, explore how they connect to ecosystems and ecological change in both direct and indirect ways, and elaborate on crucial research gaps.

The purpose of the United Nations-guided process to establish Sustainable Development Goals is to galvanize governments and civil society to rise to the interlinked environmental, societal, and economic challenges we face in the Anthropocene. We argue that the process of setting Sustainable Development Goals should take three key aspects into consideration. First, it should embrace an integrated social-ecological system perspective and acknowledge the key dynamics that such systems entail, including the role of ecosystems in sustaining human wellbeing, multiple cross-scale interactions, and uncertain thresholds. Second, the process needs to address trade-offs between the ambition of goals and the feasibility in reaching them, recognizing biophysical, social, and political constraints. Third, the goal-setting exercise and the management of goal implementation need to be guided by existing knowledge about the principles, dynamics, and constraints of social change processes at all scales, from the individual to the global. Combining these three aspects will increase the chances of establishing and achieving effective Sustainable Development Goals., AuthorCount:17

This thesis consists of three essays on macroeconomic aspects of climate change. Technological Trends and the Intertemporal Incentives For Fossil-Fuel Use analyzes how (the expectations about) the future developments of different kinds of technology affect the intertemporal incentives for fossil-fuel use. I find that improvements in the future state of technologies for alternative-energy generation, energy efficiency and total factor productivity all increase fossil-fuel use before the change takes place. The effect of changes in the efficiency of non-energy inputs is the reverse, while the effect of changes in fossil-fuel based energy technology is ambiguous. These conclusions are robust to a number of variations of the assumptions made. The Role of the Nature of Damages considers to what extent the choice of modeling climate impacts as affecting productivity, utility or the depreciation of capital affects the behavior of integrated assessment models. I carry out my analysis in two different ways. Firstly, under some simplifying assumptions, I derive a simple formula for the optimal tax on fossil-fuel use that adds up the three different types of climate effects. Secondly, I use a two-period model with exogenous climate to analyze how the allocation of fossil-fuel use over time is affected by the effects of climate change. I find that this is sensitive to the assumptions made. Indirect Effects of Climate Change investigates how direct effects of climate change in some countries have indirect effects on other countries going through changing world market prices of goods and financial instruments. When calculating the total effects of climate change, these indirect effects must also be taken into account. I first derive these indirect effects in a many-country model. Reaching agreements about reductions in the emissions of greenhouse gases is made difficult by the negative correlation there seems to be between emissions of greenhouse gases and the vulnerability to cl

This thesis consists of three essays on macroeconomic aspects of climate change. Technological Trends and the Intertemporal Incentives For Fossil-Fuel Use analyzes how (the expectations about) the future developments of different kinds of technology affect the intertemporal incentives for fossil-fuel use. I find that improvements in the future state of technologies for alternative-energy generation, energy efficiency and total factor productivity all increase fossil-fuel use before the change takes place. The effect of changes in the efficiency of non-energy inputs is the reverse, while the effect of changes in fossil-fuel based energy technology is ambiguous. These conclusions are robust to a number of variations of the assumptions made. The Role of the Nature of Damages considers to what extent the choice of modeling climate impacts as affecting productivity, utility or the depreciation of capital affects the behavior of integrated assessment models. I carry out my analysis in two different ways. Firstly, under some simplifying assumptions, I derive a simple formula for the optimal tax on fossil-fuel use that adds up the three different types of climate effects. Secondly, I use a two-period model with exogenous climate to analyze how the allocation of fossil-fuel use over time is affected by the effects of climate change. I find that this is sensitive to the assumptions made. Indirect Effects of Climate Change investigates how direct effects of climate change in some countries have indirect effects on other countries going through changing world market prices of goods and financial instruments. When calculating the total effects of climate change, these indirect effects must also be taken into account. I first derive these indirect effects in a many-country model. Reaching agreements about reductions in the emissions of greenhouse gases is made difficult by the negative correlation there seems to be between emissions of greenhouse gases and the vulnerability to cl

This thesis consists of three essays on macroeconomic aspects of climate change. Technological Trends and the Intertemporal Incentives For Fossil-Fuel Use analyzes how (the expectations about) the future developments of different kinds of technology affect the intertemporal incentives for fossil-fuel use. I find that improvements in the future state of technologies for alternative-energy generation, energy efficiency and total factor productivity all increase fossil-fuel use before the change takes place. The effect of changes in the efficiency of non-energy inputs is the reverse, while the effect of changes in fossil-fuel based energy technology is ambiguous. These conclusions are robust to a number of variations of the assumptions made. The Role of the Nature of Damages considers to what extent the choice of modeling climate impacts as affecting productivity, utility or the depreciation of capital affects the behavior of integrated assessment models. I carry out my analysis in two different ways. Firstly, under some simplifying assumptions, I derive a simple formula for the optimal tax on fossil-fuel use that adds up the three different types of climate effects. Secondly, I use a two-period model with exogenous climate to analyze how the allocation of fossil-fuel use over time is affected by the effects of climate change. I find that this is sensitive to the assumptions made. Indirect Effects of Climate Change investigates how direct effects of climate change in some countries have indirect effects on other countries going through changing world market prices of goods and financial instruments. When calculating the total effects of climate change, these indirect effects must also be taken into account. I first derive these indirect effects in a many-country model. Reaching agreements about reductions in the emissions of greenhouse gases is made difficult by the negative correlation there seems to be between emissions of greenhouse gases and the vulnerability to cl

This thesis consists of three essays on macroeconomic aspects of climate change. Technological Trends and the Intertemporal Incentives For Fossil-Fuel Use analyzes how (the expectations about) the future developments of different kinds of technology affect the intertemporal incentives for fossil-fuel use. I find that improvements in the future state of technologies for alternative-energy generation, energy efficiency and total factor productivity all increase fossil-fuel use before the change takes place. The effect of changes in the efficiency of non-energy inputs is the reverse, while the effect of changes in fossil-fuel based energy technology is ambiguous. These conclusions are robust to a number of variations of the assumptions made. The Role of the Nature of Damages considers to what extent the choice of modeling climate impacts as affecting productivity, utility or the depreciation of capital affects the behavior of integrated assessment models. I carry out my analysis in two different ways. Firstly, under some simplifying assumptions, I derive a simple formula for the optimal tax on fossil-fuel use that adds up the three different types of climate effects. Secondly, I use a two-period model with exogenous climate to analyze how the allocation of fossil-fuel use over time is affected by the effects of climate change. I find that this is sensitive to the assumptions made. Indirect Effects of Climate Change investigates how direct effects of climate change in some countries have indirect effects on other countries going through changing world market prices of goods and financial instruments. When calculating the total effects of climate change, these indirect effects must also be taken into account. I first derive these indirect effects in a many-country model. Reaching agreements about reductions in the emissions of greenhouse gases is made difficult by the negative correlation there seems to be between emissions of greenhouse gases and the vulnerability to cl

This thesis consists of three essays on macroeconomic aspects of climate change. Technological Trends and the Intertemporal Incentives For Fossil-Fuel Use analyzes how (the expectations about) the future developments of different kinds of technology affect the intertemporal incentives for fossil-fuel use. I find that improvements in the future state of technologies for alternative-energy generation, energy efficiency and total factor productivity all increase fossil-fuel use before the change takes place. The effect of changes in the efficiency of non-energy inputs is the reverse, while the effect of changes in fossil-fuel based energy technology is ambiguous. These conclusions are robust to a number of variations of the assumptions made. The Role of the Nature of Damages considers to what extent the choice of modeling climate impacts as affecting productivity, utility or the depreciation of capital affects the behavior of integrated assessment models. I carry out my analysis in two different ways. Firstly, under some simplifying assumptions, I derive a simple formula for the optimal tax on fossil-fuel use that adds up the three different types of climate effects. Secondly, I use a two-period model with exogenous climate to analyze how the allocation of fossil-fuel use over time is affected by the effects of climate change. I find that this is sensitive to the assumptions made. Indirect Effects of Climate Change investigates how direct effects of climate change in some countries have indirect effects on other countries going through changing world market prices of goods and financial instruments. When calculating the total effects of climate change, these indirect effects must also be taken into account. I first derive these indirect effects in a many-country model. Reaching agreements about reductions in the emissions of greenhouse gases is made difficult by the negative correlation there seems to be between emissions of greenhouse gases and the vulnerability to cl

Following the oil-price surge in the wake of Russia's invasion of Ukraine, many countries in the EU are proposing to cut taxes on petrol and diesel. Using standard theory and empirical estimates, we assess how such tax cuts will influence the oil income in Russia. We find that a tax cut of 20 euro cents per liter would increase Russia's oil profits by around 11-17 million Euros per day in the short run and long run. This is equivalent to 4100-6300 million Euros in a year, 0.3-0.5% of Russia's GDP or 7-11% of its military spending. We show that a cash transfer to EU citizens, with an equivalent fiscal burden as the tax cut, reduces these side effects to a fraction.

Following the oil-price surge in the wake of Russia's invasion of Ukraine, many countries in the EU are proposing to cut taxes on petrol and diesel. Using standard theory and empirical estimates, we assess how such tax cuts will influence the oil income in Russia. We find that a tax cut of 20 euro cents per liter would increase Russia's oil profits by around 11-17 million Euros per day in the short run and long run. This is equivalent to 4100-6300 million Euros in a year, 0.3-0.5% of Russia's GDP or 7-11% of its military spending. We show that a cash transfer to EU citizens, with an equivalent fiscal burden as the tax cut, reduces these side effects to a fraction.

Following Russia’s invasion of Ukraine, Western countries have looked for ways to limit Russia’s oil income. This paper considers, theoretically and quantitatively, two such options: 1) an export-quantity restriction and 2) a forced discount on Russian oil. We build a parsimonious quantifiable model of the global oil market and analyze how each of these policies affect: which Russian oil fields fall out of production; the global oil supply; and the global oil price. By these statics we derive the effects of the policies on Russian oil profits and oil-importers' surplus. The potential effects on Russian oil profits are massive. In the short run (within the first year), a quantity restriction of 20% yields Russian losses of 62 million USD per day, equivalent to 1.3% of GDP and 35% of military spending. In the long run (beyond a year) new investments become unprofitable and losses rise to 100 million USD/day, 2% of GDP and 56% of military spending. A price discount of 20% yields losses of 152 million USD per day, equivalent to 3.1% of GDP and 85% of military spending in the short run. In the long run, results are largely the same in terms of Russian profit losses, with the addition that investment in the oil sector will be harmed. A price discount puts generally more burden on Russia and less on importers compared to a quantity restriction. In fact, a price discount implies net gains for oil importers as it essentially redistributes oil rents from Russia to importers. If the restrictions are expected to last for long, the burden on oil importers decreases. Overall, both policies at all levels imply larger relative losses for Russia than for oil importers (in shares of their GDP). The case for a price discount on Russian oil is thus very strong, should oil importers want to escalate the economic warfare with Russia.

Following Russia’s invasion of Ukraine, Western countries have looked for ways to limit Russia’s oil income. This paper considers, theoretically and quantitatively, two such options: 1) an export-quantity restriction and 2) a forced discount on Russian oil. We build a parsimonious quantifiable model of the global oil market and analyze how each of these policies affect: which Russian oil fields fall out of production; the global oil supply; and the global oil price. By these statics we derive the effects of the policies on Russian oil profits and oil-importers' surplus. The potential effects on Russian oil profits are massive. In the short run (within the first year), a quantity restriction of 20% yields Russian losses of 62 million USD per day, equivalent to 1.3% of GDP and 35% of military spending. In the long run (beyond a year) new investments become unprofitable and losses rise to 100 million USD/day, 2% of GDP and 56% of military spending. A price discount of 20% yields losses of 152 million USD per day, equivalent to 3.1% of GDP and 85% of military spending in the short run. In the long run, results are largely the same in terms of Russian profit losses, with the addition that investment in the oil sector will be harmed. A price discount puts generally more burden on Russia and less on importers compared to a quantity restriction. In fact, a price discount implies net gains for oil importers as it essentially redistributes oil rents from Russia to importers. If the restrictions are expected to last for long, the burden on oil importers decreases. Overall, both policies at all levels imply larger relative losses for Russia than for oil importers (in shares of their GDP). The case for a price discount on Russian oil is thus very strong, should oil importers want to escalate the economic warfare with Russia.

Following Russia’s invasion of Ukraine, Western countries have looked for ways to limit Russia’s oil income. This paper considers, theoretically and quantitatively, two such options: 1) an export-quantity restriction and 2) a forced discount on Russian oil. We build a parsimonious quantifiable model of the global oil market and analyze how each of these policies affect: which Russian oil fields fall out of production; the global oil supply; and the global oil price. By these statics we derive the effects of the policies on Russian oil profits and oil-importers' surplus. The potential effects on Russian oil profits are massive. In the short run (within the first year), a quantity restriction of 20% yields Russian losses of 62 million USD per day, equivalent to 1.3% of GDP and 35% of military spending. In the long run (beyond a year) new investments become unprofitable and losses rise to 100 million USD/day, 2% of GDP and 56% of military spending. A price discount of 20% yields losses of 152 million USD per day, equivalent to 3.1% of GDP and 85% of military spending in the short run. In the long run, results are largely the same in terms of Russian profit losses, with the addition that investment in the oil sector will be harmed. A price discount puts generally more burden on Russia and less on importers compared to a quantity restriction. In fact, a price discount implies net gains for oil importers as it essentially redistributes oil rents from Russia to importers. If the restrictions are expected to last for long, the burden on oil importers decreases. Overall, both policies at all levels imply larger relative losses for Russia than for oil importers (in shares of their GDP). The case for a price discount on Russian oil is thus very strong, should oil importers want to escalate the economic warfare with Russia.

Following the oil-price surge in the wake of Russia's invasion of Ukraine, many countries in the EU are proposing to cut taxes on petrol and diesel. Using standard theory and empirical estimates, we assess how such tax cuts will influence the oil income in Russia. We find that a tax cut of 20 euro cents per liter would increase Russia's oil profits by around 11-17 million Euros per day in the short run and long run. This is equivalent to 4100-6300 million Euros in a year, 0.3-0.5% of Russia's GDP or 7-11% of its military spending. We show that a cash transfer to EU citizens, with an equivalent fiscal burden as the tax cut, reduces these side effects to a fraction.

Following Russia’s invasion of Ukraine, Western countries have looked for ways to limit Russia’s oil income. This paper considers, theoretically and quantitatively, two such options: 1) an export-quantity restriction and 2) a forced discount on Russian oil. We build a parsimonious quantifiable model of the global oil market and analyze how each of these policies affect: which Russian oil fields fall out of production; the global oil supply; and the global oil price. By these statics we derive the effects of the policies on Russian oil profits and oil-importers' surplus. The potential effects on Russian oil profits are massive. In the short run (within the first year), a quantity restriction of 20% yields Russian losses of 62 million USD per day, equivalent to 1.3% of GDP and 35% of military spending. In the long run (beyond a year) new investments become unprofitable and losses rise to 100 million USD/day, 2% of GDP and 56% of military spending. A price discount of 20% yields losses of 152 million USD per day, equivalent to 3.1% of GDP and 85% of military spending in the short run. In the long run, results are largely the same in terms of Russian profit losses, with the addition that investment in the oil sector will be harmed. A price discount puts generally more burden on Russia and less on importers compared to a quantity restriction. In fact, a price discount implies net gains for oil importers as it essentially redistributes oil rents from Russia to importers. If the restrictions are expected to last for long, the burden on oil importers decreases. Overall, both policies at all levels imply larger relative losses for Russia than for oil importers (in shares of their GDP). The case for a price discount on Russian oil is thus very strong, should oil importers want to escalate the economic warfare with Russia.

Following Russia’s invasion of Ukraine, Western countries have looked for ways to limit Russia’s oil income. This paper considers, theoretically and quantitatively, two such options: 1) an export-quantity restriction and 2) a forced discount on Russian oil. We build a parsimonious quantifiable model of the global oil market and analyze how each of these policies affect: which Russian oil fields fall out of production; the global oil supply; and the global oil price. By these statics we derive the effects of the policies on Russian oil profits and oil-importers' surplus. The potential effects on Russian oil profits are massive. In the short run (within the first year), a quantity restriction of 20% yields Russian losses of 62 million USD per day, equivalent to 1.3% of GDP and 35% of military spending. In the long run (beyond a year) new investments become unprofitable and losses rise to 100 million USD/day, 2% of GDP and 56% of military spending. A price discount of 20% yields losses of 152 million USD per day, equivalent to 3.1% of GDP and 85% of military spending in the short run. In the long run, results are largely the same in terms of Russian profit losses, with the addition that investment in the oil sector will be harmed. A price discount puts generally more burden on Russia and less on importers compared to a quantity restriction. In fact, a price discount implies net gains for oil importers as it essentially redistributes oil rents from Russia to importers. If the restrictions are expected to last for long, the burden on oil importers decreases. Overall, both policies at all levels imply larger relative losses for Russia than for oil importers (in shares of their GDP). The case for a price discount on Russian oil is thus very strong, should oil importers want to escalate the economic warfare with Russia.

Following the oil-price surge in the wake of Russia's invasion of Ukraine, many countries in the EU are proposing to cut taxes on petrol and diesel. Using standard theory and empirical estimates, we assess how such tax cuts will influence the oil income in Russia. We find that a tax cut of 20 euro cents per liter would increase Russia's oil profits by around 11-17 million Euros per day in the short run and long run. This is equivalent to 4100-6300 million Euros in a year, 0.3-0.5% of Russia's GDP or 7-11% of its military spending. We show that a cash transfer to EU citizens, with an equivalent fiscal burden as the tax cut, reduces these side effects to a fraction.

Following the oil-price surge in the wake of Russia's invasion of Ukraine, many countries in the EU are proposing to cut taxes on petrol and diesel. Using standard theory and empirical estimates, we assess how such tax cuts will influence the oil income in Russia. We find that a tax cut of 20 euro cents per liter would increase Russia's oil profits by around 11-17 million Euros per day in the short run and long run. This is equivalent to 4100-6300 million Euros in a year, 0.3-0.5% of Russia's GDP or 7-11% of its military spending. We show that a cash transfer to EU citizens, with an equivalent fiscal burden as the tax cut, reduces these side effects to a fraction.