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

Arik Levinson

Chapter in NBER book Energy Policy Tradeoffs between Economic Efficiency and Distributional Equity (2019), Tatyana Deryugina, Don Fullerton, and Billy Pizer, organizers
Conference held September 16-17, 2016
Published in March 2019 by Journal of the Association of Environmental and Resource Economists, volume 6, number S1 (University of Chicago Press)
© 2019 by the National Bureau of Economic Research

Economists endorse taxes as a cost-effective means of reducing pollution. But policy makers raise concerns about their regressivity, or disproportional burden on poorer families, preferring instead to regulate energy efficiency. I first show that in theory, energy efficiency standards are more regressive than energy taxes, not less. I then provide an example using data on automobiles 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): 10.1086/701186

This chapter first appeared as NBER working paper w22956, Energy Efficiency Standards Are More Regressive Than Energy Taxes: Theory and Evidence, Arik Levinson
 
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