3 years ago

How Robust is the Uniform Emissions Pricing Rule to Social Equity Concerns?

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 stemming 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 uniform emissions pricing is approximately optimal when social concerns are defined over inequity induced by the environmental tax. The deviation from uniform emissions pricing, however, becomes non-negligible when pollution tax rebates deviate much from optimal transfer schemes or when social concerns are defined over both policy-induced impacts and inequity unrelated to environmental policy. Our results are robust to a number of model extensions including the stringency of the environmental target, downstream vs. upstream taxation, pre-existing distortionary taxes, and parametric uncertainty in firms’ and households’ equilibrium tax responses.

Publisher URL: www.sciencedirect.com/science

DOI: S009506961730075X

You might also like
Discover & Discuss Important Research

Keeping up-to-date with research can feel impossible, with papers being published faster than you'll ever be able to read them. That's where Researcher comes in: we're simplifying discovery and making important discussions happen. With over 19,000 sources, including peer-reviewed journals, preprints, blogs, universities, podcasts and Live events across 10 research areas, you'll never miss what's important to you. It's like social media, but better. Oh, and we should mention - it's free.

  • Download from Google Play
  • Download from App Store
  • Download from AppInChina

Researcher displays publicly available abstracts and doesn’t host any full article content. If the content is open access, we will direct clicks from the abstracts to the publisher website and display the PDF copy on our platform. Clicks to view the full text will be directed to the publisher website, where only users with subscriptions or access through their institution are able to view the full article.