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ID: 162930

Distributional impacts of energy-heat cross-subsidization / Grainger, Corbett

Grainger, Corbett	Journal Article
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Summary/Abstract

Energy and heat cross-subsidies are common in developing and transitioning countries, but the distributional and efficiency impacts of these policies (and reform) are largely unknown. In Post-Soviet countries such as Belarus, revenues from an industrial tariff on electricity are used to cross-subsidize heating for households. We analyze the distributional impacts of cross-subsidy reform with both input output methods and a calibrated static computable general equilibrium (CGE) model with heterogeneous households based on a household consumption survey. On average, GDP gains of roughly a quarter of a percent are computed across model runs which reduce taxes and subsidies from cross-subsidization. Reducing household heating subsidy rates equally across income groups is found to be regressive. Poorer households are overly-burdened due to higher heating expenditures while richer households enjoy gains from cheaper market prices for goods. The GDP gains are even larger when the tax rates are structured to create a distributionally-neutral reform.

Key Words

Computable General Equilibrium ; Energy Prices ; Subsidies ; Input Output ; Redistributive Effects

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ID: 191412

Taxing household energy consumption in the EU: The tax burden and its redistributive effect / Amores, Antonio F.

Amores, Antonio F.	Journal Article
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The taxation of energy consumption is a central topic in current policy debate in the European Union. While raising energy taxation is part of the European Commission’s strategy for achieving its climate targets for 2030 and 2050, the ongoing dramatic increases in the price of energy products are resulting in calls to reduce taxation on them. Therefore, it is crucial to closely consider the tax burden and redistributive effects of energy taxation in order to design compensatory measures and ensure support for the green transition. In this paper, we use the EUROMOD microsimulation model to estimate the burden and the redistributive impact of energy consumption taxation on households across Member States. In doing so, we break down the roles played by differences in consumption patterns, rates of taxation (covering both excises and VAT) and their regressivity. Countries with the highest energy taxation are often not those where its tax burden on household income is the strongest. At the same time, the strongest redistributive impact is not always taking place in countries with the most regressive energy taxation.

Key Words

Europe ; Euro ; MOD ; Regressivity ; Redistributive Effects ; Energy consumption taxation

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