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Can a European wealth tax close the green investment gap?

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  • Kapeller, Jakob
  • Leitch, Stuart
  • Wildauer, Rafael

Abstract

This paper analyses the European Commission's assessment of investment needs as implied by the EU's Paris commitment. We find that official estimates of the green investment gap until 2050 are likely to seriously understate actual investment required. Against this backdrop, we assess the potential of a European wealth tax to close this investment gap. In doing so, we first provide a detailed estimate of the wealth distribution across 22 EU member countries and then develop a microsimulation model for recurring wealth taxes in these countries. The model is based on household survey data from the HFCS, but compensates for missing observations at the top of the wealth distribution by means of a Pareto model. Taking different tax designs into account, we generally find a substantial revenue potential that could contribute significantly to closing currently existing green investment gaps. We also find that compensating for the ‘missing rich’ is essential for sensibly evaluating progressive tax designs.

Suggested Citation

  • Kapeller, Jakob & Leitch, Stuart & Wildauer, Rafael, 2023. "Can a European wealth tax close the green investment gap?," Ecological Economics, Elsevier, vol. 209(C).
    • Handle: RePEc:eee:ecolec:v:209:y:2023:i:c:s092180092300112x
    DOI: 10.1016/j.ecolecon.2023.107849
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    1. Wu, Wei & Yang, Shuang & Li, Ao & Chen, Yu & Chen, Sicen, 2024. "Does interest rate liberalization affect corporate green investment?," Energy Economics, Elsevier, vol. 131(C).

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    More about this item

    Keywords

    Green infrastructure; Green investment gap; Wealth taxation;
    All these keywords.

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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