Energy Efficiency Standards Are More Regressive Than Energy Taxes: Theory and Evidence
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.
I am grateful to the Sloan Foundation for financial support, to Duncan Hobbs, Grady Killeen, and Mark Noll for research assistance, and to Sarah Aldy, Axel Anderson, Karen Palmer, Hilary Sigman, and members of the NBER Environment and Energy Economics group for especially helpful suggestions. The views expressed herein are those of the author and do not necessarily reflect the views of the National Bureau of Economic Research.
Energy Efficiency Standards Are More Regressive Than Energy Taxes: Theory and Evidence, Arik Levinson. in Energy Policy Tradeoffs between Economic Efficiency and Distributional Equity, Deryugina, Fullerton, and Pizer. 2019
Arik Levinson, 2019. "Energy Efficiency Standards Are More Regressive Than Energy Taxes: Theory and Evidence," Journal of the Association of Environmental and Resource Economists, vol 6(S1), pages S7-S36.