## How Should Shale Gas Extraction Be Taxed?

_IMF Working Papers, November 16, 2017_

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## Bibliographic details
- Authors: Philip Daniel, Alan Krupnick, Thornton Matheson, Peter J. Mullins, Ian W.H. Parry, Artur Swistak
- Published: November 16, 2017
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781484328491.001

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### Summary
- The paper concludes that the environmental and commercial features of shale gas extraction do not warrant a significantly different fiscal regime than recommended for conventional gas.
- Fiscal policies can play a role in addressing some environmental risks (e.g., greenhouse gases, scarce water, local air pollution), though in some cases their net benefits may be modest.
- Simulation analyses indicate special fiscal regimes are generally less important than other factors in determining shale gas investments, yet such regimes forego significant revenues.

### Major findings
- Environmental and commercial features of shale gas extraction do not justify a substantially different fiscal regime compared with conventional gas.
- Fiscal instruments may address environmental externalities:
  - greenhouse gases
  - scarce water
  - local air pollution
- In some cases, the net benefits of fiscal interventions to address environmental risks may be modest.
- Special fiscal regimes for shale gas tend to forego significant government revenues while having limited impact on investment decisions relative to other factors.

### Simulation analysis
- Simulation analyses suggest:
  - Special fiscal regimes are generally less important than other factors in determining shale gas investments.
  - There appears little need for special fiscal regimes given their limited influence on investment decisions.
  - Special fiscal regimes forego significant revenues.

### Policy recommendations
- Do not adopt substantially different fiscal regimes for shale gas solely because it is shale gas; align fiscal treatment with regimes recommended for conventional gas.
- Use fiscal policies selectively to address measurable environmental externalities (greenhouse gases, scarce water, local air pollution), recognizing that net benefits may be modest in some cases.
- Consider the revenue implications of special fiscal regimes, given simulations showing they can forgo significant revenues without materially altering investment incentives.

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## Content in this bundle

- **How Should Shale Gas Extraction Be Taxed?, WP/17/254, November 2017**
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_Source: https://www.imf.org/en/publications/wp/issues/2017/11/16/how-should-shale-gas-extraction-be-taxed-45410_