De-Fueling Externalities: How Tax Salience and Fuel Substitution Mediate Climate and Health Benefits

Pier Basaglia, Sophie M. Behr and Moritz Drupp

No 2041, Discussion Papers of DIW Berlin from DIW Berlin, German Institute for Economic Research

Abstract: This paper provides a comprehensive evaluation of the world’s largest environmental tax reform. We compare carbon and air pollutant emissions of the German transport sector and synthetic counterfactuals following the 1999 eco-tax reform, and find average re- ductions in external damages of around 80 billion Euros. We further show that the eco-tax induced low-carbon innovation and document much stronger demand responses to eco-tax increases than to market price movements, primarily driven by increased tax salience in newspapers. Our results highlight the key roles of salience and fuel substitution in mediating the effectiveness of fuel taxes to deliver climate and health benefits. Keywords: Environmental policy, fuel tax, carbon tax, tax elasticity, salience, fuel substitution, innovation, climate, pollution, health benefits.

Keywords: Environmental policy; fuel tax; carbon tax; tax elasticity; salience; fuel substitution; innovation; climate; pollution; health (search for similar items in EconPapers)
JEL-codes: H23 I18 Q51 R48 (search for similar items in EconPapers)
Pages: 42 p.
Date: 2023
New Economics Papers: this item is included in nep-ene, nep-env, nep-eur and nep-pub
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.diw.de/documents/publikationen/73/diw_01.c.875084.de/dp2041.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:diw:diwwpp:dp2041

Access Statistics for this paper

More papers in Discussion Papers of DIW Berlin from DIW Berlin, German Institute for Economic Research Contact information at EDIRC.
Bibliographic data for series maintained by Bibliothek ().