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Social-environmental-economic trade-offs associated with carbon-tax revenue recycling

Arbitrages économiques, sociaux et environnementaux pour le recyclage des revenus de la taxe carbone

Cyril Bourgeois, Louis-Gaëtan Giraudet and Philippe Quirion

CIRED Working Papers from HAL

Abstract: As carbon taxes gain traction and grow tighter in OECD countries, the question of their recycling becomes crucial for political acceptance. Considering the impact of the French carbon tax in the residential sector, we examine the trade-offs between fuel poverty alleviation, energy savings and economic leverage for two revenue-recycling options-as a lump-sum payment or as a subsidy for energy efficiency improvement, each restricted to low-income households-defined as those belonging to the first two quantiles of the income distribution. We do so using Res-IRF, a highly detailed energy-economy model that interacts housing features (single vs. multi-family, energy efficiency, heating fuel) with key household characteristics (tenancy status, income of both owners and occupants). We find that the energy efficiency subsidy recycling is superior to the lump-sum payment in all respects; it even fully offsets the regressive effect of the carbon tax from 2025 onwards. No recycling, however, effectively addresses fuel poverty in private, rented housing.

Keywords: carbon tax; revenue-recycling; building sector; fuel poverty; energy efficiency subsidies JEL codes: D63; H23; Q47 (search for similar items in EconPapers)
Date: 2019-03-20
New Economics Papers: this item is included in nep-ene, nep-env, nep-reg and nep-res
Note: View the original document on HAL open archive server: https://hal-enpc.archives-ouvertes.fr/hal-02073964
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