Gas taxes: Do they hurt the poor? Distributional Aspects of Fuel Taxation in Various Countries

1. Gas taxes: Do they hurt the poor?Distributional Aspects of Fuel Taxation in Various Countries Thomas Sterner Camp Resources 2010

2. What makes a good Research Chapter • Theoretically important • New/ methods? • Important for welfare • Intellectually fun • (=e.g. surprising results)

3. Climate • Global public good • Stock • Fairness

5. Is this a drastic cut?How much has temperature risen? 800 700 600 500 400 550 450

6. Copenhagen • FAILED because of • Distributional issues

7. Layout • What needs to be done in climate • An effective instrument for transport • Feasiblity and Distributional issues • In different countries • Distribution

8. Per capita targets (EU)

9. Per capita targets (China)

10. What do you think applies to the USA?

11. Policy Instruments RIGHTS REGULATION INFO/LEGAL Property rights Technological Standard Publicparticipation Taxes Subsidy (Reduct.) Tradablepermits Performance Standard Information disclosure Charge, Fee/Tariff Tradable Quotas Ban Voluntary Agreement Certificate Deposit-refund Permit Liability CPR Zoning Refunded Charge PRICE-TYPE Sterner Environmental Policy Making

12. The most efficient pol Instrument? • Kyoto • ETS • Agricultural policy • Subsidies • R&D – fusion, solar, wind….efficiency • Chinese ”One Child” policy

13. The most efficient pol Instrument? • Kyoto • ETS • Agricultural policy • Subsidies • R&D – fusion, solar, wind….efficiency • Chinese ”One Child” policy • Gasoline Taxes!

14. Growth and Environment 2020 • Can we: • Increaseincome 50% & • Reducefossil emissions 50% ? • Transport fueldemandQ = YaPb • Elasticities 1 for Y, –0.8 for P

15. Easy: • Raise fuel price 300% !  • Because P = (0.5/1.5)-1/0.8 = 3.95

16. 300% ! • Is that realistic?? • What happens to Welfare? • Isn’t there some other way ? Is it possible?

17. Is that POSSIBLE? • Yes : Europe has alreadydone it! International price of fuel is 0,3 $/l. • If the Whole World hadprices like UK or Italy a largeshare of the problem would be solved. • Thoughonly for transport. Wehaven’tdonemuchconcerningindustry and electricityyet…

18. Petrolprices Consumption/cap

19. Effect of higher fuel price in OECD

20. Transport Fuel Use in OECDGtons fuel (and ~C*(12/14))

21. Reactions?

35. Free Republicbeingironic over taxingflatulence from cattle

39. Why dont they like the gas tax?

40. The Economics of Congestion Marginal Social Cost $ Private marginal cost = Average Social Cost Aggregate Welfare Benefits of a tax Demand V* Vu Sterner Environmental Policy Making

41. Congestion and Pollution TOTAL Marginal Social Cost including environmental costs = c + V c’ + e’ m $ Marginal Social Cost (incl congestion) = c + V c’ Demand h g Marginal Private Cost = Average Social Cost = c k d e c f a b Vehicles/hour (Traffic Flow) V* Vu Sterner Environmental Policy Making

42. Benefit to society of regulation is avoided welfare loss hem but note DISTRIBUTION BENEFITS: Victims of Pollution gain fkmh State gains Tax revenue abhg COSTS Motorists who continue driving gain time but pay tax abdc-abhg = Loss of -cdhg Motorists who stop driving lose CS –beh The DISTRIBUTION of costs and benefits Sterner Environmental Policy Making

43. Does a gas tax hur the poor? WHO PAYS THE TAX? Share of incomespent on good X? Indirectuses.. Definition of income Adaptation behaviour OTHER ASPECTS: WHO SUFFERS POLLUTION TRANSITORY EFFECTS

44. Using Income

45. Using Expenditure

46. A summary measure….

47. 100 Accumulated Percent of Total Tax Burden, T K 50 L 45° 0 100 50 Accumulated Percent of Income(temporary or lifetime), yi. Calculating Suits (1-L/K)

48. Using expenditures

49. SUITS

50. S Africa