Social Equity Concerns and Differentiated Environmental Taxes

Jan Abrell, Sebastian Rausch and Giacomo A. Schwarz ()
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Giacomo A. Schwarz: ETH Zurich, Switzerland

No 16/262, CER-ETH Economics working paper series from CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich

Abstract: This paper examines pollution tax differentiation across industries in light of social equity concerns using theoretical and numerical general equilibrium analyses in an optimal tax framework. We characterize the drivers for non-uniform optimal taxes emanating from the interaction of household heterogeneity with social preferences. Quantitatively assessing the case of price-based CO2 emissions control in the U.S. economy, we find that optimal carbon taxes differ largely across industries, even when social inequality aversion is low. Our results are robust with respect to the stringency of the environmental target, non-optimal redistribution schemes, and parametric uncertainty in firms’ and households’ equilibrium tax responses.

Keywords: Differentiated environmental taxes; Carbon pricing; Industries; Heterogeneous households; Social inequality; Optimal taxation; General equilibrium (search for similar items in EconPapers)
JEL-codes: C68 H23 Q52 (search for similar items in EconPapers)
Pages: 38 pages
Date: 2016-11
New Economics Papers: this item is included in nep-ene and nep-env
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