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Assessing distributional effects of carbon pricing in Israel

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  • Missbach, Leonard
  • Steckel, Jan Christoph
  • Ward, Hauke

Abstract

The government of Israel has announced its plan to introduce a national carbon price of ILS 130 (∼USD 40) per ton of CO2 in 2023. In this study, we analyse the subsequent distributional impacts on Israeli households. We build on the recent Household Budget Survey from 2018 compiled by the Israeli Central Bureau of Statistics and merge this data with sector-specific embedded carbon intensities derived from multi-regional input-output data. We find that without further measures a carbon price would have regressive effects on Israeli households. Using statistical analyses we show that rural households, Arab households or households that own (and use) a car would face additional costs above average. Redistributing revenues from carbon pricing could help to address socially unbalanced and unintended outcomes. We model various redistribution schemes after iterating with Israeli stakeholders. Compensating households with lump sum transfers or (partially) subsidizing electricity consumption could lead to progressive outcomes, while proposed policies to lower existing transport fuel taxes would exacerbate regressive distributional effects.

Suggested Citation

  • Missbach, Leonard & Steckel, Jan Christoph & Ward, Hauke, 2023. "Assessing distributional effects of carbon pricing in Israel," Energy Policy, Elsevier, vol. 180(C).
    • Handle: RePEc:eee:enepol:v:180:y:2023:i:c:s0301421523002574
    DOI: 10.1016/j.enpol.2023.113672
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    More about this item

    Keywords

    Carbon pricing; Climate policy; Distributional effect; Inequality; Israel; Middle East and Northern Africa (MENA);
    All these keywords.

    JEL classification:

    • D57 - Microeconomics - - General Equilibrium and Disequilibrium - - - Input-Output Tables and Analysis
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Adoption and Costs; Distributional Effects; Employment Effects
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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