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The impact of energy taxes on the affordability of domestic energy


  • Florens Flues
  • Kurt van Dender


Energy affordability can be defined as a household’s ability to pay for necessary levels of energy use within normal spending patterns. This paper uses three indicators to measure energy affordability risk in 20 OECD countries. Energy affordability risk differs widely between countries. The countries with the highest GDP per capita tend to have the lowest levels of energy affordability risk. The paper then analyses how indicators of energy affordability change in response to a hypothetical tax reform that increases taxes on natural gas, heating oil and electricity in most countries analysed. Results show that, if combined with an income-tested cash transfer using one third of the change in revenue resulting from the tax reform, the reform generally improves energy affordability. If combined with a lump-sum transfer instead, results show that energy affordability increases only according to the most selective of the three indicators.

Suggested Citation

  • Florens Flues & Kurt van Dender, 2017. "The impact of energy taxes on the affordability of domestic energy," OECD Taxation Working Papers 30, OECD Publishing.
  • Handle: RePEc:oec:ctpaaa:30-en
    DOI: 10.1787/08705547-en

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    Cited by:

    1. Herwig Immervoll & Cathal O’Donoghue & Jules Linden & Denisa Sologon, 2023. "Who pays for higher carbon prices?: Illustration for Lithuania and a research agenda," OECD Social, Employment and Migration Working Papers 283, OECD Publishing.
    2. Pierce O’Reilly, 2018. "Tax policies for inclusive growth in a changing world," OECD Taxation Working Papers 40, OECD Publishing.
    3. Nils Ohlendorf & Michael Jakob & Jan Christoph Minx & Carsten Schröder & Jan Christoph Steckel, 2021. "Distributional Impacts of Carbon Pricing: A Meta-Analysis," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 78(1), pages 1-42, January.
    4. repec:diw:diwwpp:dp1776 is not listed on IDEAS
    5. Heindl, Peter & Schüßler, Rudolf, 2019. "A deprivation-based assessment of energy poverty: Conceptual problems and application to Germany," ZEW Discussion Papers 19-036, ZEW - Leibniz Centre for European Economic Research.
    6. Schmeling, Lucas & Schönfeldt, Patrik & Klement, Peter & Vorspel, Lena & Hanke, Benedikt & von Maydell, Karsten & Agert, Carsten, 2022. "A generalised optimal design methodology for distributed energy systems," Renewable Energy, Elsevier, vol. 200(C), pages 1223-1239.
    7. Vassil Tsanov & Georgi Shopov, 2018. "Material Standard of Living and Energy Poverty in Bulgaria: State and Development," Economic Studies journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 6, pages 3-20.
    8. Christophe André & Hyunjeong Hwang, 2018. "Tax reform to support growth and employment in Finland," OECD Economics Department Working Papers 1468, OECD Publishing.
    9. Robert Hagemann, 2018. "Tax Policies for Inclusive Growth: Prescription versus Practice," OECD Economic Policy Papers 24, OECD Publishing.
    10. Christine Lewis, 2019. "Raising more public revenue in Indonesia in a growth - and equity-friendly way," OECD Economics Department Working Papers 1534, OECD Publishing.

    More about this item


    carbon pricing; distributional effects; energy affordability; energy poverty; energy taxation;
    All these keywords.

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Adoption and Costs; Distributional Effects; Employment Effects

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