Distributional effects of carbon pricing by transport fuel taxation

Publikation: Beiträge in ZeitschriftenZeitschriftenaufsätzeForschung


We introduce a new microsimulation model built on household transport data to study the distributional effects of carbon-based fuel taxation of private road transport in Germany. Our data includes car-specific annual mileage, fuel efficiency, and the distinction between fuel types, allowing for a very detailed analysis. The model enables focusing on different household types as well as identifying effect heterogeneity across the income distribution. We compare the recent fuel tax scheme with three policy reform scenarios to empirically test several hypotheses regarding distributional effects of carbon pricing. We find that the legal status quo of the fuel tax has overall regressive effects, with the tax on petrol being regressive and the tax on diesel being progressive. A transformation of the current tax into a revenue-neutral carbon-harmonised fuel tax yields a progressive distributional effect, while an introduction of a new carbon tax on transport fuels is neither clearly regressive nor progressive. Combining both tax schemes also has non-regressive effects. On aggregate, the distributional effects are modest. Subgroup analyses, however, reveal that the individual burden can be substantial. In sum, our results suggest that policy makers face various options for pricing road transport greenhouse gas emissions without causing an overall disproportionate tax burden on low-income households.
ZeitschriftEnergy Economics
PublikationsstatusErschienen - 01.10.2022

Bibliographische Notiz

Funding Information:
We thank Carsten Hänisch, Sven Stöwhase, Stefan Traub, Thomas Wein, the members of the MIKMOD research group at the Fraunhofer Institute for Applied Information Technology FIT, and the participants of the World Congress of the International Microsimulation Association 2017 and 2019, the Social Policy Association Annual Conference 2017, the MAGKS Doctoral Colloquium 2017, and the Workshop on Microeconomics in Lüneburg 2019 for all their helpful suggestions. We gratefully acknowledge the comments received from an anonymous reviewer and the editor in charge, Richard S.J. Tol. Max Schäfer and Fynn Lohre provided excellent research assistance. Obviously, any remaining errors are ours. This research did not receive any specific grant from funding agencies in the public, commercial, or not-for-profit sectors.

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