Distributional effects and acceptability of carbon taxes in the EU – CHIPS policy brief No 1 published

The CHIPS project – Climate Change Impacts and Policies in Heterogeneous Societies – addresses the question of how climate change mitigation policies need to be designed in order to contribute to greater social justice at the same time. The aim is to help policy-makers develop measures that do not place additional burdens on socio-economically weaker groups that are already most affected by the consequences of climate change.

This issue is now addressed in the first CHIPS Policy Brief. Under the title “Distributional effects and acceptability of carbon taxes in the European Union”, the distributional effects of EU-wide CO2 taxes in the European Union are analysed.

The results show: A comprehensive carbon tax across all member states of the European Union would disproportionately raise the expenditure of the poorest 40% of European households. Recycling revenues through compensation transfers can offset this disproportionate burden, using just 7% of the total carbon tax revenue. The net impact of this scheme would be neutral at the European level, and with equal-per-capita transfers, the carbon tax burden would become progressive.

The paper is mainly based on a recent study by Feindt et al. which was published in the renowned journal in Energy Economics.

You can download the policy brief on the CHIPS website at http://chips-project.org/products/policy-briefs.