The heterogeneous incidence of fuel carbon taxes: Evidence from station-level data

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Journal Title
Journal ISSN
Volume Title
A1 Alkuperäisartikkeli tieteellisessä aikakauslehdessä
Date
2022-03
Major/Subject
Mcode
Degree programme
Language
en
Pages
33
1-33
Series
Journal of Environmental Economics and Management, Volume 112
Abstract
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.
Description
Funding Information: We thank two websites displaying volunteer-reported fuel prices, tankkaus.com and polttoaine.net, for providing the data for this study. We are grateful for funding from the Strategic Research Council at the Academy of Finland , grant nos. 335559 and 335560 . Tuomas Kosonen is grateful for funding from the Academy of Finland , grant no. 299373 . Publisher Copyright: © 2022 The Authors
Keywords
Carbon pricing, Carbon tax, Distributional effects, Fuel tax, Tax incidence
Other note
Citation
Harju , J , Kosonen , T , Laukkanen , M & Palanne , K 2022 , ' The heterogeneous incidence of fuel carbon taxes: Evidence from station-level data ' , Journal of Environmental Economics and Management , vol. 112 , 102607 , pp. 1-33 . https://doi.org/10.1016/j.jeem.2021.102607