How to make a carbon tax reform progressive: The role of subsistence consumption

Klenert, David and Mattauch, Linus (2015): How to make a carbon tax reform progressive: The role of subsistence consumption. Published in: Economics Letters , Vol. 138, (2016): pp. 100-103.

Abstract

This letter analyzes the distributional effects of a carbon tax reform when households must consume carbon-intensive goods above a subsistence level. The reform is progressive if revenues are recycled as uniform lump-sum transfers, in other cases it is regressive.

• Item Type: MPRA Paper
• Language: English
• Keywords: carbon tax reform, distribution, revenue recycling, inequality, non-homothetic preferences
• Subjects: D - Microeconomics > D3 - Distribution; D - Microeconomics > D6 - Welfare Economics > D60 - General; E - Macroeconomics and Monetary Economics > E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook > E62 - Fiscal Policy; H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H22 - Incidence; H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H23 - Externalities ; Redistributive Effects ; Environmental Taxes and Subsidies

References

Bovenberg, A. L., 1999. Green Tax Reforms and the Double Dividend : an Updated Reader's Guide. International Tax and Public Finance 6, 421-443.

Chiroleu-Assouline, M., Fodha, M., 2014. From regressive pollution taxes to progressive environmental tax reforms. European Economic Review 69, 126-142.

Combet, E., Ghersi, F., Hourcade, J.-c., Thery, D., 2010. Carbon Tax and Equity The importance of Policy Design. In: Critical Issues in Environmental Taxation vol. VIII, pp. 277-295.

Cremer, H., Gahvari, F., Ladoux, N., 1998. Externalities and optimal taxation. Journal of Public Economics 70, 343-364.

Dissou, Y., Siddiqui, M. S., 2014. Can carbon taxes be progressive? Energy Economics 42, 88-100.

Flues, F., Thomas, A., 2015. The distributional effects of energy taxes. OECD Taxation Working Papers 23.

Fullerton, D., 2011. Six distributional effects of environmental policy. Risk analysis 31(6), 923-9.

Fullerton, D., Monti, H., 2013. Can pollution tax rebates protect low-wage earners? Journal of Environmental Economics and Management 66(3), 539-553.

Goulder, L. H., 1995. Environmental taxation and the double dividend: A reader's guide. International Tax and Public Finance 2(2), 157-183.

Grainger, C. a., Kolstad, C. D., 2010. Who Pays a Price on Carbon? Environmental and Resource Economics 46(3), 359-376.

Jacobs, B., De Mooij, R., 2015. Pigou meets Mirrlees: on the irrelevance of tax distortions for the second-best Pigouvian tax. Journal of Environmental Economics and Management 71, 90-108.

Kaplow, L., 2012. Optimal control of externalities in the presence of income taxation. International Economic Review 53(2), 487-509.

Klenert, D., Schwerhoff, G., Edenhofer, O., Mattauch, L., 2016. Environmental Taxation, Inequality and Engels Law: The Double Dividend of Redistribution. Environmental and Resource Economics, online first. http://dx.doi.org/10.1007/s10640-016-0070-y.

Rausch, S., Metcalf, G. E., Reilly, J. M., 2011. Distributional impacts of carbon pricing: A general equilibrium approach with micro-data for households. Energy Economics 33, S20-S33.

Rausch, S., Reilly, J. M., Metcalf, G. E., Paltsev, S., 2010. Distributional Implications of Alternative U . S . Greenhouse Gas Control Measures. The B.E. Journal of Economic Analysis & Policy 10(2).

Sterner, T., 2011. Fuel Taxes and the Poor: The Distributional Effects of Gasoline Taxation and Their Implications for Climate Policy. Johns Hopkins University Press.

Tietenberg, T. H., 1990. Economic Instruments for Environmental Regulation. Oxford Review of Economic Policy 6(1), 17-33.

Wier, M., Lenzen, M., Munksgaard, J., Smed, M., 2001. Effects of Household Consumption Patterns on C02 Requirements. Economic Systems Research 13(3).