NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Energy Efficiency Standards Are More Regressive Than Energy Taxes: Theory and Evidence

Arik Levinson

NBER Working Paper No. 22956
Issued in December 2016
NBER Program(s):EEE, PE

Economists promote energy taxes as cost-effective. But policymakers raise concerns about their regressivity, or disproportional burden on poorer families, preferring to set energy efficiency standards instead. I first show that in theory, regulations targeting energy efficiency are more regressive than energy taxes, not less. I then provide an example in the context of automotive fuel consumption in the United States: taxing gas would be less regressive than regulating the fuel economy of cars if the two policies are compared on a revenue-equivalent basis.

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Document Object Identifier (DOI): 10.3386/w22956

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