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Distributional Impacts of Energy Taxes

Author

Listed:
  • William A. Pizer
  • Steven Sexton

Abstract

Despite popularity among economists for their efficiency, energy pollution taxes enjoy less political support than standards-based regulation because of common perceptions that they burden the poor relative to the rich. However, the literature on pollution tax incidence and consumption surveys in Mexico, the United Kingdom, and the United States, suggest energy taxes need not be as regressive as often assumed. This paper demonstrates that the incidence of such taxes varies according to the energy commodities that are taxed, the physical, social and climatic characteristics of jurisdictions in which they are implemented, and how the revenue is used. It is also shown that the variation in household energy expenditure within income groups is greater than variation across income groups in many cases. These horizontal equity impacts are reviewed, as are their implications for policy making.

Suggested Citation

  • William A. Pizer & Steven Sexton, 2017. "Distributional Impacts of Energy Taxes," NBER Working Papers 23318, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:23318
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Hasan, Syed Abul & Mozumder, Pallab, 2017. "Income and energy use in Bangladesh: A household level analysis," Energy Economics, Elsevier, vol. 65(C), pages 115-126.
    2. repec:red:issued:16-217 is not listed on IDEAS
    3. José M. Labeaga & Xavier Labandeira & Xiral López-Otero, 2018. "Energy Tax Reform and Poverty Alleviation in Mexico," Working Papers 1801, Universidade de Vigo, Departamento de Economía Aplicada.
    4. Stephie Fried & Kevin Novan & William Peterman, 2018. "The Distributional Effects of a Carbon Tax on Current and Future Generations," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 30, pages 30-46, October.

    More about this item

    JEL classification:

    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

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