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Social Equity Concerns and Differentiated Environmental Taxes

Author

Listed:
  • Jan Abrell

    (ETH Zurich, Switzerland)

  • Sebastian Rausch

    (ETH Zurich, Switzerland)

  • Giacomo A. Schwarz

    (ETH Zurich, Switzerland)

Abstract

This paper examines pollution tax differentiation across industries in light of social equity concerns using theoretical and numerical general equilibrium analyses in an optimal tax framework. We characterize the drivers for non-uniform optimal taxes emanating from the interaction of household heterogeneity with social preferences. Quantitatively assessing the case of price-based CO2 emissions control in the U.S. economy, we find that optimal carbon taxes differ largely across industries, even when social inequality aversion is low. Our results are robust with respect to the stringency of the environmental target, non-optimal redistribution schemes, and parametric uncertainty in firms’ and households’ equilibrium tax responses.

Suggested Citation

  • Jan Abrell & Sebastian Rausch & Giacomo A. Schwarz, 2016. "Social Equity Concerns and Differentiated Environmental Taxes," CER-ETH Economics working paper series 16/262, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
    • Handle: RePEc:eth:wpswif:16-262
    as

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    References listed on IDEAS

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    More about this item

    Keywords

    Differentiated environmental taxes; Carbon pricing; Industries; Heterogeneous households; Social inequality; Optimal taxation; General equilibrium;
    All these keywords.

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Adoption and Costs; Distributional Effects; Employment Effects
    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models

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