The researchers used an input-output model to analyse the cost implications for households of introducing carbon or energy taxation in six EU countries. Due to data limitations and problems of comparability, results are calculated in more detail for Germany, Italy, Spain and the UK than for France and Belgium.
Household cost implications of energy taxes are calculated both with and without taking account of modelled changes in consumer behaviour. The study does not allow for substitution in production in response to the imposition of energy taxes. The authors acknowledge that their results are relevant therefore only as a short-term model.
Hypothetical taxes modelled by the authors are a carbon dioxide tax of Ecu0.1 per kilogram of carbon dioxide emitted for each country, and an energy tax that raises the same revenue as the CO2 tax within each country.
They conclude that both taxes would be regressive in three out of four countries studied in depth. When not allowing for changes in consumer behaviour, the average increase in indirect tax payments by German households is 6%. Analysed by income group, the increase is 8% for the lowest income group but only about 5% for the highest.
The regressive impact of both taxes is most striking in the UK, where average indirect taxes would rise by nearly 14%, but the poorest households would suffer a 17% increase while the increase for the richest would be just over 8%. Allowing for behavioural responses by consumers, the distributional effects of a carbon tax would still be regressive, the authors conclude.
Spain provides the one exception to the general trend, with either an energy or a carbon dioxide tax calculated to have a progressive impact. Compared with an average increase in tax of 9%, the poorest households would pay an extra 8% and the richest an extra 10%. The trend seems to be caused by the greater consumption of petrol by richer Spanish households, the authors note.
Keele University +44 1782 583 103. References: "The distributional implications of pollution taxes on European families."
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