Working Paper: NBER ID: w23677
Authors: Don Fullerton; Erich Muehlegger
Abstract: Public economics has a well-developed literature on tax incidence – the ultimate burdens from tax policy. This literature is used here to describe not only the distributional effects of environmental taxes or subsidies but also the likely incidence of non-tax regulations, energy efficiency standards, or other environmental mandates. Recent papers find that mandates can be more regressive than carbon taxes. We also describe how the distributional effects of such policies can be altered by various market conditions such as limited factor mobility, trade exposure, evasion, corruption, or imperfect competition. Finally, we review data on carbon-intensity of production and exports around the world in order to describe implications for effects of possible carbon taxation on countries with different levels of income per capita.
Keywords: environmental regulations; tax incidence; distributional effects; carbon taxes; mandates
JEL Codes: H22; H23; Q48; Q52
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| elasticities of demand and supply (J20) | burden of pollution tax (H23) |
| demand for fossil fuel-intensive goods more inelastic than supply (Q31) | consumers bear greater burden of the tax (H22) |
| distributional effects of environmental mandates (H23) | more regressive than carbon taxes (H23) |
| low-income households spending higher fraction of income on energy (Q41) | distributional effects of environmental mandates more regressive (H23) |
| market imperfections (D43) | exacerbate regressive nature of policies (E65) |
| burden of carbon policy (Q58) | fall more on consumers in low-income countries (F61) |
| producers in high-income countries (F61) | face different burdens due to energy production methods (L94) |