The heterogeneous incidence of fuel carbon taxes: Evidence from station-level data

Jarkko Harju, Tuomas Kosonen, Marita Laukkanen and Kimmo Palanne

Journal of Environmental Economics and Management, 2022, vol. 112, issue C

Abstract: We use station-level price data and a significant diesel fuel carbon tax reform to study who bears the economic burden of fuel carbon taxes. We use a difference-in-differences strategy to estimate the pass-through of the large carbon tax increase to retail prices, where we compare retail diesel prices faced by private motorists to retail gasoline prices. We find that on average fuel carbon taxes are less than fully passed through to consumer prices, which suggests that consumers and the supply chain split the burden of these taxes. Using information on station location, we match price observations with postcode-level average incomes and measures of urbanization, and show that there are significant differences in the pass-through rate across areal incomes and between rural and urban areas up to one year after the reform. The effect of fuel carbon taxes on consumer prices decreases with areal income and with the degree of urbanization.

Keywords: Carbon tax; Carbon pricing; Fuel tax; Tax incidence; Distributional effects (search for similar items in EconPapers)
JEL-codes: H22 H23 Q41 Q54 Q58 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeeman:v:112:y:2022:i:c:s0095069621001443

DOI: 10.1016/j.jeem.2021.102607

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