Journal
ECOLOGICAL ECONOMICS
Volume 70, Issue 12, Pages 2472-2485Publisher
ELSEVIER SCIENCE BV
DOI: 10.1016/j.ecolecon.2011.08.004
Keywords
Environmental tax reform; Distributional impacts; European Union; Econometric modelling
Funding
- EPSRC [EP/I02929X/1] Funding Source: UKRI
- NERC [NE/G007748/1] Funding Source: UKRI
- Engineering and Physical Sciences Research Council [EP/I02929X/1] Funding Source: researchfish
- Natural Environment Research Council [NE/G007748/1] Funding Source: researchfish
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The paper discusses the distributional implications of environmental tax reform (ETR) for households, and presents new results from modelling the impacts of a major ETR for the European Union. The distributional effects arise from the new environmental taxes, any tax reductions made as part of the ETR, the wider macroeconomic impacts from the ETR, any special provisions in the ETR, and the environmental benefits from the ETR. The paper's literature review makes clear that while the impacts from taxes on the household use of energy are very often regressive, transport taxes tend not to be, although the impacts differ between urban and rural households. Moreover, the net distributional impact is often less regressive, or not at all, once the wider distributional effects are taken into account. Residual regressive effects can in principle be removed by further adjustments in the tax or benefits system. The modelling results suggest that an ETR in Europe will actually increase real incomes across the EU as a whole, and will not be generally regressive, although the results differ by country and for different socio-economic groups. The political acceptability of ETR may depend on the worst effects on these groups being mitigated in some way. (C) 2011 Elsevier B.V. All rights reserved.
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