The heterogeneous incidence of fuel carbon taxes: Evidence from station-level data
Harju, Jarkko; Kosonen, Tuomas; Laukkanen, Marita; Palanne, Kimmo (2022)
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Harju, Jarkko
Kosonen, Tuomas
Laukkanen, Marita
Palanne, Kimmo
Elsevier
2022
Kuvaus
peerReviewed
Tiivistelmä
We use station-level price data and a significant diesel-fuel carbon tax reform to study who bears the economic burden of fuel carbon taxes. We use a difference-in-differences strategy to estimate the pass-through of the large carbon tax increase to retail prices, where we compare retail diesel prices faced by private motorists to retail gasoline prices. We find that on average fuel carbon taxes are less than fully passed through to consumer prices, which suggests that consumers and the supply chain split the burden of these taxes. Using information on station location, we match price observations with postcode-level average incomes and measures of urbanization, and show that there are significant differences in the pass-through rate across areal incomes and between rural and urban areas up to one year after the reform. The effect of fuel carbon taxes on consumer prices decreases with areal income and with the degree of urbanization.
JEL
H22, H23, Q41, Q54, Q58
Avainsanat
Carbon tax, Carbon pricing, Fuel tax, Tax incidence, Distributional effects