Are Carbon Taxes Regressive in India? Evidence from NSSO Data

2019 ◽  
Vol 67 (1-2) ◽  
pp. 30-44
Author(s):  
Aaqib Ahmad Bhat ◽  
Prajna Paramita Mishra
Keyword(s):  
Energy Use ◽  
Carbon Tax ◽  
Electricity Consumption ◽  
National Sample ◽  
Sample Survey ◽  
Liquefied Petroleum Gas ◽  
Carbon Taxes ◽  
Carbon Pricing ◽  
Lump Sum ◽  
Poor Households

Carbon tax, being less costly in achieving a given abatement target, has been highly recommended by economists and international organisations. However, distributional concerns against the carbon tax has been a matter of concern in the domain of public policy. This article tries to analyse the distributional impact of Carbon tax in India by using National Sample Survey Office (NSSO) data. The results of the study indicate that carbon pricing seems to hit the lower-expenditure households by a greater proportion than the rich elites. The severity was found to be greater for the rural households than the urban households. Strong regressivity was found in the energy use for cooking and lighting. However, for transportation, the results indicate mild progressivity. Among the various energy fuels, households using coal, liquefied petroleum gas (LPG), kerosene, firewood and dung cake for cooking and lighting were found to be hit hard by carbon pricing. In contrast, electricity consumption was found to be distributionally neutral. Petrol and diesel use for transportation were found to be progressive. The study advocates that regressivity of carbon tax should be taken into account by way of targeted revenue recycling measures like lump-sum transfers among poor households and cut in other distortionary taxes.

scholarly journals Reducing energy poverty through carbon tax revenues in South Africa

2017 ◽  
Vol 28 (3) ◽  
pp. 12 ◽  
Author(s):  
Harald Winkler
Keyword(s):  
South Africa ◽  
Indoor Air Pollution ◽  
Carbon Tax ◽  
Tax Revenue ◽  
Liquefied Petroleum Gas ◽  
Carbon Taxes ◽  
Energy Poverty ◽  
Tax Revenues ◽  
Poor Households ◽  
Rooftop Solar

How much can poverty be reduced through carbon tax revenue? This study analyses specific programmes, with carbon taxes generating revenues and equivalent spending on programmes to reduce energy poverty. The twin challenges of development and climate change could be addressed in this way in South Africa. A simple spreadsheet model was used to estimate revenue available from a carbon tax, given different tax rates and emission projections. Four programmes to reduce energy poverty were quantified: electrification, extended free basic energy, scaling-up sustainable housing, and subsidising rooftop solar for poor households. Matching carbon revenue with equivalent expenditure, the study found that applying all carbon revenue to a single programme could fund the national budget for electrification. Hundreds of thousands, and up to tens of millions, of households could receive free energy in the form of 5 kg of liquefied petroleum gas every month, as well as better houses that are warmer in winter and with fewer health impacts from indoor air pollution. Carbon revenues could fund at least a few hundred thousand improved homes, or subsidies for at least 100 000 rooftop solar systems per year to poor households. Institutional and other constraints would have to be addressed. Carbon revenue could fully fund all four programmes combined into an integrated strategy, in three of the four scenarios. The results suggested that full funding could be available from 2019 or from 2025, dependent on carbon tax revenue scenario. Energy poverty can be reduced by expenditure of carbon tax revenues.

Optimal Dynamic Carbon Taxes in a Climate–Economy Model with Distortionary Fiscal Policy

2019 ◽  
Author(s):  
Lint Barrage
Keyword(s):  
Fiscal Policy ◽  
Optimal Taxation ◽  
Carbon Tax ◽  
Natural Capital ◽  
Income Taxes ◽  
Carbon Taxes ◽  
Capital Income ◽  
Economy Model ◽  
Lump Sum ◽  
Distortionary Taxes

Abstract How should carbon be taxed as a part of fiscal policy? The literature on optimal carbon pricing often abstracts from other taxes. However, when governments raise revenues with distortionary taxes, carbon levies have fiscal impacts. While they raise revenues directly, they may shrink the bases of other taxes (e.g. by decreasing employment). This article theoretically characterizes and then quantifies optimal carbon taxes in a dynamic general equilibrium climate–economy model with distortionary fiscal policy. First, this article establishes a novel theoretical relationship between the optimal taxation of carbon and of capital income. This link arises because carbon emissions destroy natural capital: they accumulate in the atmosphere and decrease future output. Consequently, this article shows how the standard logic against capital income taxes extends to distortions on environmental capital investments. Second, this article characterizes optimal climate policy in sub-optimal fiscal settings where income taxes are constrained to remain at their observed levels. Third, this article presents a detailed calibration that builds on the seminal DICE approach but adds features essential for a setting with distortionary taxes, such as a differentiation between climate change production impacts (e.g. on agriculture) and direct utility impacts (e.g. on biodiversity existence value). The central quantitative finding is that optimal carbon tax schedules are 8–24% lower when there are distortionary taxes, compared to the setting with lump-sum taxes considered in the literature.

Carbon Taxes

2021 ◽  
Author(s):  
Jorge H. García ◽  
Thomas Sterner
Keyword(s):  
Low Income ◽  
Social Cost ◽  
Carbon Tax ◽  
Carbon Price ◽  
Low Income Countries ◽  
Carbon Taxes ◽  
Social Cost Of Carbon ◽  
Carbon Pricing ◽  
Sectoral Differences ◽  
Carbon Taxation

Economists argue that carbon taxation (and more generally carbon pricing) is the single most powerful way to combat climate change. Since this is so controversial, we need to explain it better, and to be precise, the efficiency gains are largest when the costs of abatement are strongly heterogeneous. This is often—but not always—the case. When it is not, standards can fill much the same role. To internalize the climate externality, economic efficiency calls for a global carbon tax (or price) that is equal to the global damage or the so-called social cost of carbon. However, equity considerations as well as existing geographical and sectoral differences in the effectiveness of carbon taxation at reducing emissions, suggest earlier implementation of relatively high taxation levels in some sectors or countries—for instance, among richer economies followed by a more gradual phase-in among low-income countries. The number of national and subnational carbon pricing policies that have been implemented around the world during the first years following the Paris Agreement of 2015 is significant. By 2020, these programs covered 22% of global emissions with an average carbon price (weighted by the share of emissions covered) of USD15/tCO2 and a maximum price of USD120/tCO2. The share of emissions covered by carbon pricing as well as carbon prices themselves are expected to consistently rise throughout the decade 2021–2030 and beyond. Many experts agree that the social cost of carbon is in the range USD40–100/tCO2. Anti-climate lobbying, public opposition, and lack of understanding of the instrument are among the key challenges faced by carbon taxation. Opportunities for further expansion of carbon taxation lie in increased climate awareness, the communicative resources governments have to help citizens understand the logic behind carbon taxation, and earmarking of carbon tax revenues to address issues that are important to the public such as fairness.

Energy Poverty Jinx

2019 ◽  
pp. 60-79
Author(s):  
Sovik Mukherjee
Keyword(s):  
Energy Security ◽  
Energy Use ◽  
National Sample ◽  
Primary Energy ◽  
Sample Survey ◽  
Policy Dialogue ◽  
Energy Poverty ◽  
Level Data ◽  
Cooking Energy ◽  
Composition Pattern

The chapter starts by comparing India with China, U.S. and world as a whole in respect of composition, pattern of primary energy use, fuel access to clean cooking energy, and access to electricity for the households. Moving on, this relationship between energy and poverty has preoccupied development economists for decades and begs for a policy dialogue on whether the lack of energy in terms of the 3E's—energy security, energy accessibility, and energy use—makes a nation energy poor or not. This moves the focus on the state of equity in the distribution of energy in India. The chapter, then, looks at the issue of energy poverty, in particular, rural-urban magnitude of energy poverty by estimating the specific concentration curve using National Sample Survey (NSSO) household unit level data from the 68th round (July 2011 – June 2012). To conclude, the study comments on how the optimum fuel mix design should look and talks about sustainable strategies involving the use of new renewables for breaking India's energy poverty jinx.

The Political Economy of Carbon Tax: International Practice and the Australian Model

2013 ◽  
Vol 01 (01) ◽  
pp. 1350007
Author(s):  
Alex LO
Keyword(s):  
Policy Design ◽  
Carbon Tax ◽  
Emission Trading ◽  
The Political ◽  
Carbon Taxes ◽  
Carbon Pricing ◽  
Fixed Price ◽  
Emissions Mitigation ◽  
Pricing System ◽  
Trading Scheme

Carbon taxes create incentives for controlling greenhouse gases by putting a price on these emissions. In theory major carbon emitters would pay more under an effective carbon tax. In practice political considerations often dominate and consequently compromise effectiveness in emissions mitigation. Australia's carbon pricing mechanism is a recent example. It involves the use of a fixed-price instrument that resembles a carbon tax and will eventually turn into an emission trading scheme and enable price fluctuation. The policy design is however questionable for overcompensating big polluters and legitimizing the failure to curb emissions domestically. This paper offers a review of the development of carbon tax policies in various national contexts with a focus on Australia. Lessons from the international practices could provide a useful reference for China to advance its timely commitment to establishing a carbon pricing system.

Introducing Carbon Taxes in Russia: The Relevance of Tax-Interaction Effects

2014 ◽  
Vol 14 (3) ◽  
pp. 723-754 ◽  
Author(s):  
Anton Orlov ◽  
Harald Grethe
Keyword(s):  
Carbon Tax ◽  
International Mobility ◽  
Carbon Taxes ◽  
Welfare Gains ◽  
Lump Sum ◽  
Corrective Effect ◽  
Carbon Taxation ◽  
Distortionary Taxes ◽  
Tax Interaction ◽  
The Cost

Abstract The theoretical literature on the double-dividend concept is mainly focused on pre-existing distortionary taxes in the labour and capital markets; the relevance of interactions with other taxes is often neglected. Using an analytical model and a numerical general equilibrium model, we analyse the welfare effects of carbon taxes and their interaction with other taxes applied in Russia. We find that substituting carbon taxes for labour taxes in Russia can substantially reduce the cost of carbon taxation compared to returning carbon tax revenues to households in lump-sum form and can even result in welfare gains in Russia. In conclusion, introducing carbon taxes has an indirect corrective effect with respect to the distorting effect of export taxation on energy resources. Furthermore, welfare costs of carbon taxation can be significant under the assumption of perfect international mobility of capital. Nevertheless, the cost can be more than compensated in case of a high carbon trade price.

scholarly journals THE ROLE OF BORDER CARBON ADJUSTMENTS IN A U.S. CARBON TAX

2018 ◽  
Vol 09 (01) ◽  
pp. 1840011 ◽  
Author(s):  
WARWICK J. MCKIBBIN ◽  
ADELE C. MORRIS ◽  
PETER J. WILCOXEN ◽  
WEIFENG LIU
Keyword(s):  
Computable General Equilibrium ◽  
Carbon Tax ◽  
Real Exchange Rates ◽  
The United States ◽  
Computable General Equilibrium Model ◽  
Carbon Taxes ◽  
Carbon Policy ◽  
Lump Sum ◽  
Net Exports ◽  
The Impact

This paper examines carbon tax design options in the United States using an intertemporal computable general equilibrium model of the world economy called G-Cubed. In this paper, we discuss four policy scenarios that explore two overarching issues: (1) the effects of a carbon tax under alternative assumptions about the use of the resulting revenue, and (2) the effects of a system of import charges on carbon-intensive goods (“border carbon adjustments” or BCAs). Consistent with earlier studies, we find that the carbon tax raises considerable revenue and reduces CO2 emissions significantly relative to baseline, no matter how the revenue is used. Gross annual revenue from the carbon tax with lump sum rebating and no BCA begins at $110 billion in 2020 and rises gradually to $170 billion in 2040. By 2040, annual CO2 emissions fall from 5.5 billion metric tons (BMT) under the baseline to 2.4 BMT, a decline of 3.1 BMT, or 57%. Cumulative emissions over 2020 to 2040 fall by 48 BMT. Also consistent with earlier studies, we find that the carbon tax has very small overall impacts on gross domestic product (GDP), wages, employment, and consumption. Different uses of the revenue from the carbon tax result in slightly different levels and compositions of GDP across consumption, investment and net exports. Overall, using carbon tax revenue to reduce the capital income tax rate results in better macroeconomic outcomes than using the revenue for lump sum transfers. Counter to their purported purpose of protecting U.S. trade strength, for a given revenue policy, BCAs tend to produce lower net exports than the carbon taxes alone. This is generally because the BCAs raise the value of the dollar relative to other currencies, thus lowering exports more than they lower imports. This is consistent with standard results in the international trade literature on the effects of import tariffs and export subsidies on real exchange rates, a result that is often overlooked in the discussion of domestic carbon policy. In a finding new to the literature, our results show that BCAs can have strikingly different effects depending on the use of the revenue. Under a lump sum rebate, BCAs exacerbate the impact of the carbon tax by lowering domestic output further than it would fall under the carbon tax alone. Under a capital tax swap, however, BCAs have a moderating effect: they reduce the impact of the tax on most industries.

scholarly journals Abject Poverty and Multiple Deprivations in Rural India Based on SECC 2011 in Comparison with NSSO and NFHS: Summary Findings Analyzed

2017 ◽  
Vol 6 (1) ◽  
pp. 67
Author(s):  
Joseph Abraham
Keyword(s):  
Rural Development ◽  
Multidimensional Poverty ◽  
Poverty Line ◽  
National Sample ◽  
Sample Survey ◽  
Rural India ◽  
Base Line ◽  
Planning Commission ◽  
Poor Households ◽  
The Government

<em>This paper analyzes latest findings from the recently completed Socio Economic and Caste Census 2011(SECC2011), by focusing on rural abject poverty and multi-dimensionality of it by the pre-set seven deprivation parameters across rural India .As per schema of SECC2011 for analyzing the various facets of multi-dimensional poverty, firstly one set of households will be excluded on the basis of 13 automatic exclusion parameters, and subsequently another set of households will be automatically included on the basis of five parameters and finally the remaining set would be subjected to verifications by seven deprivations.  Thereby, the SECC 2011 had set in motion an effort to capture some specifics of multidimensional poverty as desired by the Ministry of Rural Development (MoRD) in the Government of India.  It is surmised here that the union of automatically included and deprived households will provide a base line of the number of poor through a multi-dimensional mode. The intersection of automatically included households with the seven deprivations variables will also identify the socio economic characteristics of the   abjectly poor. Besides presenting the above analysis of SECC data, an attempt is made to compare these findings with those based on the unidimensional National Sample Survey (NSSO) poverty ratios ( by S.Tendulker 2009, C Rangarajan 2012) and multi-dimensional (R. Radhakrishna et al 2010) NFHS data based studies.  A separate set of multi-dimensional poverty numbers were arrived at in the past  for three Five Year Plans (1992-97, 1997- 02, 2002-07) through the Below Poverty Line (BPL) Censuses that were under taken by the Ministry of Rural Development (MoRD) to identify the poor households through  the State/UT Governments. These later estimates of poor households were never permitted to exceed the official poverty ratio worked out by the Planning Commission for respective State/UT governments. The concepts used to arrive at these poor households will be briefly reviewed here as a prelude to explaining the modes operandi of identifying multi dimensional poverty via SECC 2011. A committee was set in up in February  2013 under the Chairmanship of Abhijit Sen , then Planning Commission Member, to examine the SECC indicators for data analysis, to recommend appropriate methodologies for determining classes of beneficiaries for different rural development programmes. Some of the recommendations of the committee would also be put to scrutiny. </em>

scholarly journals The Political Economy of Carbon Pricing: Lessons from the Mexican Carbon Tax Experience for the Mexican Cap-and-Trade System

2021 ◽  
pp. 133-150
Author(s):  
Juan Carlos Belausteguigoitia ◽  
Vidal Romero ◽  
Alberto Simpser
Keyword(s):  
Political Economy ◽  
Carbon Tax ◽  
International Environmental Agreements ◽  
Climate Change Policy ◽  
Policy Instruments ◽  
The Political ◽  
Carbon Taxes ◽  
Cap And Trade ◽  
Carbon Pricing ◽  
Change Policy

AbstractPrice-based climate change policy instruments, such as carbon taxes or cap-and-trade systems, are known for their potential to generate desirable results such as reducing the cost of meeting environmental targets. Nonetheless, carbon pricing policies face important economic and political hurdles. Powerful stakeholders tend to obstruct such policies or dilute their impacts. Additionally, costs are borne by those who implement the policies or comply with them, while benefits accrue to all, creating incentives to free ride. Finally, costs must be paid in the present, while benefits only materialize over time. This chapter analyses the political economy of the introduction of a carbon tax in Mexico in 2013 with the objective of learning from that process in order to facilitate the eventual implementation of an effective cap-and-trade system in Mexico. Many of the lessons in Mexico are likely to be applicable elsewhere. As countries struggle to meet the goals of international environmental agreements, it is of utmost importance that we understand the conditions under which it is feasible to implement policies that reduce carbon emissions.

scholarly journals Toward behavioural climate policy: Framing of carbon pricing policy has deep effects on Canadian attitudes and behaviours

2019 ◽  
Author(s):  
Matthew Martin ◽  
Jayden Rae ◽  
Brooke Struck ◽  
Sekoul Krastev
Keyword(s):  
Political Communication ◽  
Public Perception ◽  
Consumer Behaviour ◽  
Carbon Taxes ◽  
Pricing Policy ◽  
Carbon Pricing ◽  
Policy Framing ◽  
The Public ◽  
Lump Sum ◽  
Insight Into

This study looked at the effects of framing and payment structure on the public reception of acarbon pricing policy. The study closely mirrored the design of the Federal backstop of the Pan-Canadian Framework, under which consumers receive a direct payment to offset the carbon taxes collected in their province. There were four key findings. First, framing the payment as an “incentive” increased the likelihood of consumers spending their return on green renovations as opposed to everyday purchases. Alternatively, calling the payment a “rebate” pushed people towards spending the money on everyday expenses.Second, if the policy was designed so that payments were disbursed monthly in smaller amounts, they were more likely to be spent on everyday purchases. Conversely, annual lump sum payments were more likely to be allocated towards savings. Third, there was an interaction effect between framing the payment as a “dividend” and the lump sum annual payment structure; in this case, consumers were much more likely to put the money towards savings. Finally, in terms of public perception of the policy, framing it as an “incentive” led to the most positive response, notably in terms of how well the policy reflects on Canada’s image and its alignment with Canadian values. These findings offer insight into how the use of different language to describe a carbon pricing policy, and the use of different payment schedules, can affect what consumers would spend their rebates on and their perception of the policy. How to frame public policy issues advantageously is an important part of political communication. These preliminary findings offer insight into how a carbon pricing policy can be framed and structured so as to promote the changes in consumer behaviour that the policy seeks to bring about.

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