Environmental Taxation

1. Introduction

Environmental taxes, such as carbon taxes, are increasingly used as policy instruments to reduce greenhouse gases and internalize environmental costs. These instruments aim to change behavior by increasing prices on environmental harmful goods and to shift production and consumption toward less polluting alternatives.

Environmental taxes raise important questions about fairness. The costs of climate policies, particularly those associated with higher energy prices, are often passed on to consumers, making the economic burden heavier for certain groups. Studies show that low-income households tend to bear a disproportionate share of these costs relative to their income, making such taxes regressive in many contexts.^,

The regressive effects of environmental taxation can result in reduced public acceptance and political resistance. For instance, the Yellow Vests movement in S. 69France emerged partly in response to fuel taxes that were seen as disproportionately affecting rural and lower-income households. This shows the need for policymakers to carefully consider the distributional impacts of environmental taxes when designing and implementing climate policies.

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