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The incidence of fuel taxation in India

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  • Datta, Ashokankur
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    Abstract

    Fuel taxes have returned to centre stage as a potential policy instrument for greenhouse gas abatement. On the basis of some studies in developed countries, critics have complained that a fuel tax would be regressive. This paper uses data from a representative household survey covering more than 124 thousand Indian households to examine this claim. It finds that a fuel tax would be progressive as would a carbon tax. Using an input-output approach, it is found that the progressivity results holds good even when one considers indirect consumption of fuel through its use as an intermediate input. Sensitivity checks allowing for differing price elasticities of demand between rich and poor confirm this result for most of fuels. A tax on kerosene is the only fuel tax that is regressive in all situations.

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    Bibliographic Info

    Article provided by Elsevier in its journal Energy Economics.

    Volume (Year): 32 (2010)
    Issue (Month): Supplement 1 (September)
    Pages: S26-S33

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    Handle: RePEc:eee:eneeco:v:32:y:2010:i:supplement1:p:s26-s33

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    Web page: http://www.elsevier.com/locate/eneco

    Related research

    Keywords: Fuel tax Tax burden Regressivity;

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    Cited by:
    1. Asafu-Adjaye, John & Mahadevan, Renuka, 2013. "Implications of CO2 reduction policies for a high carbon emitting economy," Energy Economics, Elsevier, Elsevier, vol. 38(C), pages 32-41.
    2. Webster, Allan & Ayatakshi, Sukanya, 2013. "The effect of fossil energy and other environmental taxes on profit incentives for change in an open economy: Evidence from the UK," Energy Policy, Elsevier, vol. 61(C), pages 1422-1431.
    3. Garg, Amit & Vishwanathan, Saritha & Avashia, Vidhee, 2013. "Life cycle greenhouse gas emission assessment of major petroleum oil products for transport and household sectors in India," Energy Policy, Elsevier, vol. 58(C), pages 38-48.
    4. James B. Davies & Xiaojun Shi & John Whalley, 2012. "The Possibilities for Global Inequality and Poverty Reduction Using Revenues from Global Carbon Pricing," University of Western Ontario, Economic Policy Research Institute Working Papers 20127, University of Western Ontario, Economic Policy Research Institute.
    5. Blackman, Allen & Osakwe, Rebecca & Alpizar, Francisco, 2009. "Fuel Tax Incidence in Developing Countries: The Case of Costa Rica," Discussion Papers, Resources For the Future dp-09-24-efd, Resources For the Future.
    6. Coxhead, Ian & Chan, Nguyen Van, 2011. "Vietnam's New Environmental Tax Law: What Will It Cost? Who Will Pay?," Staff Paper Series 561, University of Wisconsin, Agricultural and Applied Economics.
    7. Paul J. Burke, 2014. "Green Pricing in the Asia Pacific: An Idea Whose Time Has Come?," CCEP Working Papers 1409, Centre for Climate Economics & Policy, Crawford School of Public Policy, The Australian National University.
    8. Coxhead, Ian & Wattanakuljarus, Anan & Nguyen, Chan V., 2013. "Are Carbon Taxes Good for the Poor? A General Equilibrium Analysis for Vietnam," World Development, Elsevier, vol. 51(C), pages 119-131.
    9. Randy Chugh & Maureen L. Cropper, 2014. "The Welfare Effects of Fuel Conservation Policies in the Indian Car Market," NBER Working Papers 20460, National Bureau of Economic Research, Inc.

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