Abstract
The objective of this thesis is two-fold. First to consider the theoretical foundations of fuel policy and secondly to undertake an empirical investigation of the impact of the fuel oil tax on the rate of contraction of the coal industry. Chapter One is concerned with the selection of Paretian welfare economics as a theoretical basis for empirical work. The restrictive nature of the Paretian assumptions is examined and a possible social welfare decision rule for the energy sector identified. The construction of the rule is postulated to be dependent on the concept of Government embodied in the various market adjustment mechanisms which are sufficient, although not necessary, to satisfy the conditions for Paretian optimality. Two such mechanisms are identified; the Interventionist and workable competition adjustment processes. Chapter Two considers a historical perspective of the Interventionist adjustment process noting the close ties between Government and other power groups. Chapter Three studies the fuel oil tax and suggests that in terms of Paretian optimality an improvement in the efficient use of resources could have been obtained by making lump-sum redundancy payments to miners rather than imposing the tax. This solution is identified as a workable competition alternative, although it is possible that an Interventionist policy could recommend the same solution. Chapter Four develops this theme by considering, qualitatively, the other policy instruments used to slow down the contraction rate of the coal industry. The impact of Government price restraint on the C.E.G.B.'s power station plant ordering programme is discussed. Chapter Five critically appraises the theoretical inconsistencies of both Paretian welfare economics and workable competition. The arbitrary nature of intervention is further examined and in consequence a liberal energy policy alternative is discussed along with suggestions for further research.