Carbon Tax Incidence and Household Energy Demand in the U.S

Jun Zhang

No 235569, 2016 Annual Meeting, July 31-August 2, Boston, Massachusetts from Agricultural and Applied Economics Association

Abstract: This paper develops a model based on the general equilibrium framework to evaluate Household’s excess burden of carbon tax levied on energy goods (electricity and natural gas). The model accounts for tax distortion on labor market and cross-price effects between energy goods. With data from the U.S. Residential Energy Consumption Survey, own price and cross-price elasticities of energy goods are estimated. Substitution effects are found between electricity and natural gas, and omitting such effects will overestimate the excess burden of carbon tax. The results indicate that carbon tax performs differently on affecting excess burden of low, middle and high income households. With a low pre-set labor tax rate, higher income households have lower excess burden comparing to lower income households, but with a high pre-set labor tax rate, the effect is reverse.

Keywords: Consumer/Household Economics; Demand and Price Analysis; Industrial Organization; Public Economics (search for similar items in EconPapers)
Pages: 42
Date: 2016-05-23
New Economics Papers: this item is included in nep-ene and nep-env
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Persistent link: https://EconPapers.repec.org/RePEc:ags:aaea16:235569

DOI: 10.22004/ag.econ.235569

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