Abstract

Jules Linden (LISER and NUIG), Cathal O'Donoghue (LISER and NUIG), and Denisa M. Sologon (LISER) will be presenting The Distributional Impact of Carbon Taxation and Mitigation Options across five EU countries

The EU’s Fit for 55 package increases the number of sectors subject to carbon pricing. Empirical evidence shows that low-income households spend a larger share of their disposable income on carbon intensive goods. The burden of a carbon tax will consequently be larger for low-income households, raising equity concerns. Regressive impacts of carbon taxation were found in many countries, though their impact can be progressive when revenues are used. There is however a lack of studies comparing how the impact of a common carbon tax would differ across countries. This paper provides a comparative study of the distributional impact of a carbon tax and of revenue recycling options in five EU countries. Using microsimulation modelling, we study their impact along the distribution of income. We find regressive impacts in all countries. Our findings highlight that cross-country differences in the population structure and consumption patterns imply differential distributional impacts of carbon taxation. The effectiveness of mitigation measures in compensating losers and reducing the regressive impact of the carbon tax differs across countries depending on population structure. This suggests that mitigation strategies will need to differ across countries to mitigate the regressive impact of an EU-wide carbon tax.

Practical information

The seminar will be held on MS Teams. To get access to the seminar, please make sure to register! The link will be sent to your email address after you confirm your registration.