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Who pays for higher carbon prices?: Illustration for Lithuania and a research agenda

Author

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  • Herwig Immervoll

    (OECD)

  • Cathal O’Donoghue

    (University of Galway)

  • Jules Linden

    (University of Galway)

  • Denisa Sologon

    (Luxembourg Institute of Socio-Economic Research)

Abstract

This paper lays out an approach, and a research agenda, for assessing the impact of carbon pricing on household budgets. It relies on a rich set of available data and policy models and combines them in a way that is informative for mapping the gains and losses at the household level in the short term as countries transition to a low-carbon economy. After accounting for direct burdens from higher fuel prices, indirect effects from higher prices of goods other than fuel, and households’ behavioural responses, overall burdens are only mildly regressive. Recycling carbon-tax revenues back to households allows considerable scope for avoiding or cushioning losses for large parts of the population, and existing policy models can be used to design compensation measures that facilitate majority support for carbon tax packages.

Suggested Citation

  • Herwig Immervoll & Cathal O’Donoghue & Jules Linden & Denisa Sologon, 2023. "Who pays for higher carbon prices?: Illustration for Lithuania and a research agenda," OECD Social, Employment and Migration Working Papers 283, OECD Publishing.
    • Handle: RePEc:oec:elsaab:283-en
    DOI: 10.1787/8f16f3d8-en
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    More about this item

    Keywords

    Carbon tax; Carbon tax; climate change; inequality; revenue recycling;
    All these keywords.

    JEL classification:

    • C8 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • 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

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