NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Distributional Impacts of Energy Taxes

William A. Pizer, Steven Sexton

NBER Working Paper No. 23318
Issued in April 2017
NBER Program(s):Environment and Energy Economics

Despite popularity among economists for their efficiency, energy pollution taxes enjoy less political support than standards-based regulation because of common perceptions that they burden the poor relative to the rich. However, the literature on pollution tax incidence and consumption surveys in Mexico, the United Kingdom, and the United States, suggest energy taxes need not be as regressive as often assumed. This paper demonstrates that the incidence of such taxes varies according to the energy commodities that are taxed, the physical, social and climatic characteristics of jurisdictions in which they are implemented, and how the revenue is used. It is also shown that the variation in household energy expenditure within income groups is greater than variation across income groups in many cases. These horizontal equity impacts are reviewed, as are their implications for policy making.

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Document Object Identifier (DOI): 10.3386/w23318

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