Abstract
This paper studies environmental taxation in a Mirrlees setting when energy, a polluting good, is used both as a factor of production and a Önal consumption good. The model is calibrated for the Czech economy.
We study two di§erent tax systems. Both consider a non-linear income tax but the Örst one considers a linear energy tax, while the second one allows for a non-linear taxation of energy.
We show that: (i) householdsí energy consumption should be subsidized except if the environmental external costs of energy consumption are suc ciently high (ii) The subsidy applied to energy consumption should decrease with income.