Combining input-output analysis and micro-simulation to assess the effects of carbon taxation on Spanish households

• Published in: Fiscal studies Vol. 20; no. 3; pp. 305 - 320
• Main Authors: Labandeira, Xavier, Labeaga, José
• Format: Journal Article
• Language: English
• Published: London, UK The Institute for Fiscal Studies 01.09.1999; Institute for Fiscal Studies; Blackwell Publishing Ltd
• Subjects: C33; C67; Carbon dioxide; Carbon dioxide emissions; carbon taxation; Carbon taxes; Climate change; Climate policy; CO2 emissions; Economic models; Effects; Emission charges; Emissions; Emissions policy; Energy; Energy taxes; environmental taxation; Estimated taxes; Green taxes; Greenhouse effect; Greenhouse gas emissions; H31; Household economics; Households; Input output; Input output analysis; Pollutant emissions; Q28; Simulation; Spain; Studies; Tax rates; Tax reform; Taxation economics; Spain
• ISSN: 0143-5671; 1475-5890
• DOI: 10.1111/j.1475-5890.1999.tb00015.x

This paper explores the effects of a tax levied on Spanish energy-related CO2 emissions. After justifying the relevance of carbon taxation in the Spanish context, we consider the introduction of a product (fossil-fuel) tax with a rate obtained through the 'actual damage cost' method. Our empirical analysis proceeds in two stages. First, we employ an input–output demand model to calculate the price changes after the introduction of carbon taxation. In a second stage, simulation with Spanish household micro-data for 1994 yields the environmental and economic effects of a Spanish carbon tax. We find a limited short-run reaction to the carbon tax, which hampers its environmental success. The carbon tax burden is, however, significant, with a proportional distribution across households.