Environmental taxation and distributional implications in Denmark

Klinge Jacobsen, Henrik and Wier, Mette (2001): Environmental taxation and distributional implications in Denmark.

Abstract

Environmental taxes imposed on households have been introduced in many countries. However, few countries have reached the level of environmental taxation as is seen in Denmark today although many are considering shifting the tax burden towards the consumption that are harming the environment. The total tax burden imposed on households in Denmark through taxes on energy use of all kinds, use of water and waste production etc. is of a considerable size. This paper explore the combined size of all these taxes and duties that are now justified by environmental concern. The size of taxes on heating, transport fuels, electricity, water, waste, plastic bags, registration of cars, annual car use, pesticides etc. are analysed. The distribution of taxes on different household categories is discussed and the fairness of this distribution in relation to the environmental pressure that each household category is responsible for is questioned. The shifting of tax structure from high marginal income tax to consumption based taxes especially environmental taxes might have distributional impacts among different income groups which have not been considered part of the tax policy. Also the different impact from various taxes are analysed. Are the different taxes characterised by varying distributional properties? The hypothesis could be that some environmental taxes are less regressive than others are. Preliminary results suggest that tax on gasoline and especially registration levies for cars are less regressive than taxes on electricity and water. The paper discuss the extent to which the present composition of environmental taxes are biased towards basic goods as heating, electricity and water instead of consumption of other goods that are using resources and polluting the environment just as much? The distributional impacts are illustrated using household consumption survey data and data covering household expenditures on energy. The size of energy taxes and the more recently introduced green taxes are compared. Also the composition of taxes as paid directly by consumers or indirectly through their purchase of domestically produced goods are discussed. Finally the paper argues that distributional issues should be considered also when designing environmental tax policies.

• Item Type: MPRA Paper
• Language: English
• Keywords: Environmental tax Distributional impact Denmark
• Subjects: Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q4 - Energy > Q48 - Government Policy; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q5 - Environmental Economics > Q52 - Pollution Control Adoption and Costs ; Distributional Effects ; Employment Effects

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