Distributional effects of carbon pricing in Europe

A new study, calculating the cost burden for individual private households related to carbon pricing, has just been published in the renowned journal Energy Economics. A research team from four countries, including partners from the CHIPS project, analyses the distributional effects of carbon pricing in Europe, thereby focusing on the disparities between member countries. The authors provide an empirically sound and consistently calculated estimate for the distributional effects in almost all member states. They find that the burden differs much more between countries than within countries.

Subsequently, the study provides a pragmatic solution: some of the money from the carbon pricing could be used to counter this social imbalance between countries. 7 percent of the revenues would be sufficient to reduce the average burden on the poorest tenth of the population to a level which is approximately equivalent to the average burden on all households.

For more information, please look at the MCC press release, which is available in English and in German.

Reference: Feindt, S., U. Kornek, J.M. Labeaga, T. Sterner, H. Ward (2021). Understanding regressivity: Challenges and opportunities of European carbon pricing. In: Energy Economics, 2021; https://doi.org/10.1016/j.eneco.2021.105550.