Equity and ecotax reform in the EU: achieving a 10 per cent reduction in CO2 emissions using excise duties

This paper considers the distributional effects of imposing additional excise duties on energy products according to carbon content. The assumed duties escalate from 1999 to 2010 and achieve levels reducing CO2 emissions by 10 per cent below baseline by 2010 for 11 EU member states. By 2010, real personal disposable incomes are 1.6 per cent above baseline and employment is 1.2 per cent above, assuming that the change is tax-revenue-neutral. The study concludes that the changes will be weakly regressive for nearly all the member states in the study if revenues are used to reduce employers’ taxes and strongly progressive if they are given back lump-sum to households.