The implications for households of environmental tax reform (ETR) in Europe

Paul Ekins, Hector Pollitt, Jennifer Barton and Daniel Blobel

Ecological Economics, 2011, vol. 70, issue 12, 2472-2485

Abstract: The paper discusses the distributional implications of environmental tax reform (ETR) for households, and presents new results from modelling the impacts of a major ETR for the European Union. The distributional effects arise from the new environmental taxes, any tax reductions made as part of the ETR, the wider macroeconomic impacts from the ETR, any special provisions in the ETR, and the environmental benefits from the ETR. The paper's literature review makes clear that while the impacts from taxes on the household use of energy are very often regressive, transport taxes tend not to be, although the impacts differ between urban and rural households. Moreover, the net distributional impact is often less regressive, or not at all, once the wider distributional effects are taken into account. Residual regressive effects can in principle be removed by further adjustments in the tax or benefits system. The modelling results suggest that an ETR in Europe will actually increase real incomes across the EU as a whole, and will not be generally regressive, although the results differ by country and for different socio-economic groups. The political acceptability of ETR may depend on the worst effects on these groups being mitigated in some way.

Keywords: Environmental tax reform; Distributional impacts; European Union; Econometric modelling (search for similar items in EconPapers)
Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (30)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolec:v:70:y:2011:i:12:p:2472-2485

DOI: 10.1016/j.ecolecon.2011.08.004

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