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The distributional impacts of U.S. energy policy

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  • Metcalf, Gilbert E.

Abstract

This paper surveys energy policy in the United States from a distributional perspective. Focusing on the distributional impacts of energy taxes is too narrow a framework. The United States relies much more heavily on regulation than taxation to address energy-related market failures. It argues that most regulatory policies and tax subsidies to achieve energy policy goals are regressive. This includes fuel economy standards, EV purchase incentives, and energy efficiency tax incentives. In contrast, a carbon tax is likely to be progressive, even when ignoring the use of revenue. The view that carbon taxes are regressive stems from an incomplete distributional analysis that assumes all impacts arise from increases in the costs of consumer goods and services. Recent analyses have emphasized the importance of impacts on sources of income. In particular, a carbon tax is likely to reduce returns to capital more than wages. With capital disproportionately held by higher income households, this differential factor income effect is progressive. In addition, transfer income, more important for lower income households, tends to be indexed and so contributes to a carbon tax's progressivity. How carbon tax revenue is used can add even greater progressivity to a carbon tax reform.

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  • Metcalf, Gilbert E., 2019. "The distributional impacts of U.S. energy policy," Energy Policy, Elsevier, vol. 129(C), pages 926-929.
  • Handle: RePEc:eee:enepol:v:129:y:2019:i:c:p:926-929
    DOI: 10.1016/j.enpol.2019.01.076
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    References listed on IDEAS

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    Cited by:

    1. Mattauch, Linus & Zhao, Jiaxin, 2021. "When standards have better distributional consequences than carbon taxes," INET Oxford Working Papers 2020-25, Institute for New Economic Thinking at the Oxford Martin School, University of Oxford.
    2. Richard S. J. Tol, 2023. "Navigating the energy trilemma during geopolitical and environmental crises," Papers 2301.07671, arXiv.org.
    3. Spurlock, C. Anna & Fujita, K. Sydny, 2022. "Equity implications of market structure and appliance energy efficiency regulation," Energy Policy, Elsevier, vol. 165(C).
    4. Ravigné, Emilien & Ghersi, Frédéric & Nadaud, Franck, 2022. "Is a fair energy transition possible? Evidence from the French low-carbon strategy," Ecological Economics, Elsevier, vol. 196(C).
    5. Bistline, John & Blanford, Geoffrey & Mai, Trieu & Merrick, James, 2021. "Modeling variable renewable energy and storage in the power sector," Energy Policy, Elsevier, vol. 156(C).
    6. Zhao, Jiaxin & Mattauch, Linus, 2022. "When standards have better distributional consequences than carbon taxes," Journal of Environmental Economics and Management, Elsevier, vol. 116(C).

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