Distributional effects of carbon pricing by transport fuel taxation
Research output: Working paper › Working papers
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Distributional effects of carbon pricing by transport fuel taxation. / Jacobs, Leif; Quack, Lara; Mechtel, Mario.
Lüneburg : Institut für Volkswirtschaftslehre - Leuphana Universität Lüneburg, 2021. (University of Lüneburg Working Paper Series in Economics; No. 405).Research output: Working paper › Working papers
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TY - UNPB
T1 - Distributional effects of carbon pricing by transport fuel taxation
AU - Jacobs, Leif
AU - Quack, Lara
AU - Mechtel, Mario
PY - 2021/11/25
Y1 - 2021/11/25
N2 - 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 annual mileage at the car-level, the distinction between fuel types, as well as car-specific fuel consumption, allowing for a very detailed analysis. The model allows focusing on different types of households 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 acting regressive and the tax on diesel acting 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. 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.
AB - 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 annual mileage at the car-level, the distinction between fuel types, as well as car-specific fuel consumption, allowing for a very detailed analysis. The model allows focusing on different types of households 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 acting regressive and the tax on diesel acting 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. 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.
KW - H22
KW - H23
KW - Q48
KW - Q58
KW - R48
KW - 330
KW - carbon pricing
KW - fuel tax
KW - distributional effects
KW - road transport
KW - microsimulation
KW - ex-ante impact assessment
KW - Economics
M3 - Working papers
T3 - University of Lüneburg Working Paper Series in Economics
BT - Distributional effects of carbon pricing by transport fuel taxation
PB - Institut für Volkswirtschaftslehre - Leuphana Universität Lüneburg
CY - Lüneburg
ER -