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Fuel for inequality: Distributional effects of environmental reforms on private transport

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  • Tovar Reaños, Miguel Angel
  • Sommerfeld, Katrin

Abstract

This paper provides the first empirical evidence of the distributional effects of subsidies for the purchase of alternative vehicles based on an extended version of Hausman's exact consumer surplus. Consistently with economic theory, we estimate changes in household welfare, inequality and social welfare corresponding to different reforms. First, we find that an additional tax on conventional fuel is regressive. However, returning the additional tax revenue via lump-sum transfers can alleviate this effect. Second, when the additional revenue is also used to finance subsidies for electrical and compressed natural gas (CNG) vehicles, households that own such vehicles experience welfare gains. However, this policy also increases income inequality and decreases social welfare.

Suggested Citation

  • Tovar Reaños, Miguel Angel & Sommerfeld, Katrin, 2016. "Fuel for inequality: Distributional effects of environmental reforms on private transport," ZEW Discussion Papers 16-090, ZEW - Leibniz Centre for European Economic Research.
    • Handle: RePEc:zbw:zewdip:16090
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    3. Antimiani, Alessandro & Costantini, Valeria & Paglialunga, Elena, 2023. "Fossil fuels subsidy removal and the EU carbon neutrality policy," Energy Economics, Elsevier, vol. 119(C).
    4. Tovar Reanos, Miguel, 2020. "Car ownership and the distributional and environmental policies to reduce driving behavior," Papers WP673, Economic and Social Research Institute (ESRI).
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    More about this item

    Keywords

    Transport policies; Distributional effects; Electrical vehicles; Passenger cars;
    All these keywords.

    JEL classification:

    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • R48 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Government Pricing and Policy
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models

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