Income-based or Place-based? Carbon Dividends under Spatial Distribution of Automobile Demand

Yoshifumi Konishi, Sho Kuroda and Shunsuke Managi

No 2024-019, Keio-IES Discussion Paper Series from Institute for Economics Studies, Keio University

Abstract: We empirically examine the distributional consequences of income-based versus place-based recycling of carbon tax revenues when automobile demand varies substantially over geographic space. Using a large household dataset from Japan, we estimate a discrete-continuous choice model that parsimoniously accounts for the geographic distribution of incomes, public transit, and portfolio preferences. The model outperforms a naive random-coefficient model in explaining the observed spatial distribution of automobile demand, and allows us to estimate the price and income elasticities that vary by income and public transit density. The estimated model is used to simulate the distributional impacts of income-based versus place-based revenue recycling on carbon emissions and consumer welfare. Our results show the following: first, the improvement in consumer welfare from rebates substantially outweighs the increase in negative externalities from the rebound in carbon emissions; second, place-based recycling outperforms income-based recycling in mitigating welfare losses for low-income and rural households, which face the greatest welfare losses from the carbon tax.

Keywords: Carbon dividend; climate justice; equity-efficiency trade-off (search for similar items in EconPapers)
JEL-codes: H23 H31 L62 Q54 Q56 (search for similar items in EconPapers)
Pages: 52 pages
Date: 2024-08-29
New Economics Papers: this item is included in nep-ene, nep-env, nep-pbe, nep-tre and nep-ure
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Persistent link: https://EconPapers.repec.org/RePEc:keo:dpaper:2024-019

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