© 2011 – RFF Press
Fuel Taxes and the Poor challenges the conventional wisdom that gasoline taxation, an important and much-debated instrument of climate policy, has a disproportionately detrimental effect on poor people. Increased fuel taxes carry the potential to mitigate carbon emissions, reduce congestion, and improve local urban environment. As such, higher gasoline taxes could prove to be a fundamental part of any climate action plan. However, they have been resisted by powerful lobbies that have persuaded people that increased fuel taxation would be regressive. Reporting on examples of over two dozen countries, this book sets out to empirically investigate this claim. The authors conclude that while there may be some slight regressivity in some high-income countries, as a general rule, fuel taxation is a progressive policy particularly in low income countries. Rich countries can correct for regressivity by cutting back on other taxes that adversely affect poor people, or by spending more money on services for the poor. Meanwhile, in low-income countries, poor people spend a very small share of their money on fuel for transport. Some costs from fuel taxes may be passed on to poor people through more expensive public transportation and food transport. Nevertheless, in general the authors find that gasoline taxes become more progressive as the income of the country in question decreases. This book provides strong arguments for the proponents of environmental taxation. It has immediate policy implications at the intersection of multiple subject areas, including transportation, environmental regulation, development studies, and climate change. Published with Environment for Development initiative.
"Sterner’s book makes a strong case that arguments of fuel-tax regressivity are flawed: in most countries, fuel is a luxurious good, consumed largely by the rich… Though Sterner’s meta-analysis shows that tax progressivity decreases with a country’s median income, the book demonstrates that, in richer countries, the general regressivity of the tax can be alleviated through revenue recycling or tax swapping. This compilation makes it more difficult to argue against fuel taxes; policymakers should take note." - Elisheba Spiller, Bulletin of Indonesian Economic Studies
1. Introduction Thomas Sterner 2. The Consumer Burden of a Carbon Tax on Gasoline Kevin A. Hassett, Aparna Mathur,and Gilbert E. Metcalf 3. Distributional and Efficiency Impacts of Increased U.S. Gasoline Taxes Antonio M. Bento, Lawrence H. Goulder, Mark R. Jacobsen,and Roger H. von Haefen 4. Estimates from a Consumer Demand System: Implications for the Incidence of Environmental Taxes Sarah E. West and Roberton C. Williams III 5. Fuel Tax Incidence in Costa Rica: Gasoline versus Diesel Allen Blackman, Rebecca Osakwe,and Francisco Alpizar 6. The Income Distribution effects of Fuel Taxation in Mexico Thomas Sterner and Ana Lozada 7. Is Fuel Taxation Progressive or Regressive in China? Jing Cao 8. Are Fuel Taxes in India Regressive? Ashokankur Datta 9. Is Reducing Subsidies on Vehicle Fuel Equitable? A Lesson from Indonesian Reform Experience Arief Anshory Yusuf and Budy P. Resosudarmo 10. Distributional Consequences of Transport Fuel Taxes in Ethiopia Alemu Mekonnen, Rahel Deribe and Liyousew Gebremedhin 11. Political Petrol Pricing: the Distributional Impact of Ghana's Fuel Subsidies Wisdom Akpalu and Elizabeth Robinson 12. Distributional Effects of Transport Fuel Taxes in Kenya: Case of Nairobi John Mutua, Martin Börjesson, and Thomas Sterner 13. Assessing the Impact of Oil Price Changes on Income Distribution in Mali: An Input-Output Approach Kangni Kpodar 14. An Analysis of the Efficacy of Fuel Taxation for Pollution Control in South Africa Margaret Chitiga, Ramos Mabugu, and Emmanuel Ziramba 15. Fuel Taxation and Income Distribution in Tanzania Adolf F. Mkenda, John K. Mduma,and Wilhelm M. Ngasamiaku 16. Distributional Effects in Europe Thomas Sterner and Emanuel Carlsson 17. Who pays taxes on fuels and public transport services in the Czech Republic? Ex post and ex ante measurement Milan Ščasný 18. Distributional Effect of Reducing Transport Fuel Subsidies in Iran Sanaz Ettehad and Thomas Sterner 19. Conclusions Thomas Sterner, Jing Cao, Emanuel Carlsson, and Elizabeth Robinson