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

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  • Arik Levinson

Abstract

Economists promote energy taxes as cost-effective. But policymakers raise concerns about their regressivity, or disproportional burden on poorer families, preferring to set energy efficiency standards instead. I first show that in theory, regulations targeting energy efficiency are more regressive than energy taxes, not less. I then provide an example in the context of automotive fuel consumption 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, 2016. "Energy Efficiency Standards Are More Regressive Than Energy Taxes: Theory and Evidence," NBER Working Papers 22956, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:22956
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    JEL classification:

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

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