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Who Bears the Economic Costs of Environmental Regulations?

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  • Don Fullerton
  • Erich Muehlegger

Abstract

Public economics has a well-developed literature on tax incidence – the ultimate burdens from tax policy. This literature is used here to describe not only the distributional effects of environmental taxes or subsidies but also the likely incidence of non-tax regulations, energy efficiency standards, or other environmental mandates. Recent papers find that mandates can be more regressive than carbon taxes. We also describe how the distributional effects of such policies can be altered by various market conditions such as limited factor mobility, trade exposure, evasion, corruption, or imperfect competition. Finally, we review data on carbon-intensity of production and exports around the world in order to describe implications for effects of possible carbon taxation on countries with different levels of income per capita.

Suggested Citation

  • Don Fullerton & Erich Muehlegger, 2017. "Who Bears the Economic Costs of Environmental Regulations?," CESifo Working Paper Series 6596, CESifo.
    • Handle: RePEc:ces:ceswps:_6596
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    1. Landis, Florian & Rausch, Sebastian, 2019. "Policy Instrument Choice with Co-Benefits: The Case of Decarbonizing Transport," Conference papers 333103, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    2. Greene, David L. & Welch, Jilleah G., 2018. "Impacts of fuel economy improvements on the distribution of income in the U.S," Energy Policy, Elsevier, vol. 122(C), pages 528-541.
    3. Janet Currie & Reed Walker, 2019. "What Do Economists Have to Say about the Clean Air Act 50 Years after the Establishment of the Environmental Protection Agency?," Journal of Economic Perspectives, American Economic Association, vol. 33(4), pages 3-26, Fall.
    4. Drupp, Moritz A. & Meya, Jasper N. & Baumgärtner, Stefan & Quaas, Martin F., 2017. "Economic inequality and the value of nature," Economics Working Papers 2017-08, Christian-Albrechts-University of Kiel, Department of Economics.

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    More about this item

    Keywords

    distributional effects; carbon tax; environmental policy; incidence;
    All these keywords.

    JEL classification:

    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence

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