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Distributional impacts of carbon taxation and revenue recycling: a behavioural microsimulation. ESRI WP626, June 2019

Angel Tovar Reaños, Miguel and Lynch, Muireann A. (2019) Distributional impacts of carbon taxation and revenue recycling: a behavioural microsimulation. ESRI WP626, June 2019. [Working Paper]

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    Abstract

    Carbon taxation is a regressive policy which contributes to public opposition towards same. We employ the Exact Affine Stone Index demand system to examine the extent to which carbon taxation in Ireland reduces emissions, as well as its distributional impacts. The Engel curves for various commodity groupings are found to be non-linear, which renders the particular demand system we have chosen more suitable than other methods found in the extant literature. We find that a carbon tax increase can decrease emissions, but is indeed regressive. Recycling the revenues to households mitigates these regressive effects. A targeted allocation that directs the revenues towards less affluent households is found to reduce inequality more than flat allocation that divides the revenues equally amongst all households; however both methods are capable of mitigating the regressive effects of the tax increase.

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    Item Type: Working Paper
    Subjects for non-EU documents: EU policies and themes > Policies & related activities > energy policy (Including international arena)
    EU policies and themes > Policies & related activities > environmental policy (including international arena)
    EU policies and themes > Policies & related activities > tax policy
    Countries > Ireland
    Subjects for EU documents: UNSPECIFIED
    EU Series and Periodicals: UNSPECIFIED
    EU Annual Reports: UNSPECIFIED
    Series: Series > Economic and Social Research Institute (ESRI), Dublin > ESRI Working Papers
    Depositing User: Phil Wilkin
    Official EU Document: No
    Language: English
    Date Deposited: 29 Dec 2019 14:26
    Number of Pages: 26
    Last Modified: 29 Dec 2019 14:26
    URI: http://aei.pitt.edu/id/eprint/102237

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