The Incidence of the European Union Emissions Trading System and the Role of Revenue Recycling: Empirical Evidence from Combined Industry- and Household-Level Data

Martin Beznoska, Johanna Cludius and Viktor Steiner

No 1227, Discussion Papers of DIW Berlin from DIW Berlin, German Institute for Economic Research

Abstract: We calculate the expected incidence of the European Union Emissions Trading System (EU-ETS) using industry and household-level data. By combining data on direct CO2 emissions by production sector from the German Environmental Account with the German Input-Output Accounts, we calculate the CO2 intensity of each sector covered by the EU-ETS. We focus on the impact of price increases in the electricity sector, both directly in the form of higher electricity bills for consumers and indirectly through products that use electricity as an input to production. Taking into account behavioral effects derived from an estimated consumer-demand system, we provide incidence calculations on the basis of the German Income and Expenditure Survey for the year 2008 data updated to 2013. We confirm the ex-ante expected regressive effect, which is, however, both rather small in magnitude and can be offset and even more than offset by revenue recycling, in particular the reduction of social security contributions on labor income.

Keywords: European Union Emissions Trading System; tax incidence; revenue recycling; Almost Ideal Demand System (search for similar items in EconPapers)
JEL-codes: D12 H23 Q52 (search for similar items in EconPapers)
Pages: 29 p.
Date: 2012
New Economics Papers: this item is included in nep-ene, nep-env and nep-eur
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Citations: View citations in EconPapers (1)

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