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Energy Efficiency Standards Are More Regressive Than Energy Taxes: Theory and Evidence

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  • Arik Levinson

Abstract

Economists endorse taxes as a cost-effective means of reducing pollution. But policy makers raise concerns about their regressivity, or disproportional burden on poorer families, preferring instead to regulate energy efficiency. I first show that in theory, energy efficiency standards are more regressive than energy taxes, not less. I then provide an example using data on automobiles in the United States. Taxing gas would be less regressive than regulating the fuel economy of cars if the two policies are compared on a revenue-equivalent basis.

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  • Arik Levinson, 2019. "Energy Efficiency Standards Are More Regressive Than Energy Taxes: Theory and Evidence," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 6(S1), pages 7-36.
    • Handle: RePEc:ucp:jaerec:doi:10.1086/701186
    DOI: 10.1086/701186
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    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies

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