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

In: Energy Policy Tradeoffs between Economic Efficiency and Distributional Equity

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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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Suggested Citation

  • Arik Levinson, 2016. "Energy Efficiency Standards Are More Regressive Than Energy Taxes: Theory and Evidence," NBER Chapters, in: Energy Policy Tradeoffs between Economic Efficiency and Distributional Equity, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberch:14213
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    as
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    JEL classification:

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

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