We assess the ex-ante distributional consequences and identify the potential winners and loosers of fiscal policies pushed forward in the context of the EU Green Deal. Our toolbox allows us to also assess the budgetary effect of such reforms and the role of alternative revenue-recycling compensatory measures.
Fit-for-55 package: Carbon Border Adjustment Mechanism and the revision of the Energy Taxation Directive
During 2020-2021, the team contributed to the ex-ante assessment of two key policy initiatives proposed under the Fit-for-55 package: the Carbon Border Adjustment Mechanism (CBAM) and the revision of the Energy Taxation Directive (ETD). We combined our microsimulation model EUROMOD (incl. the Indirect Tax Tool) with the genenal equilibrium model JRC-GEM-E3, to assess the expected budgetary and redistributive consequences of these reforms, alongside their expected effects on Green House Gas (GHG) emissions, employment, prices and GDP. The results of these studies were included in the Impact Assessments of the legislative proposals. Results suggest that increasing carbon taxes at the border and/or increasing minimum energy taxes can substantially contribute to the Green Deal objectives, without increasing inequality if the right set of compensatory measures are implemented through revenue recycling. We also work in close collaboration with Directorate General for Employment and Social Affairs (DG EMPL) on the reinforcement of our methodological tools to assess and monitor the implementation of green taxation policies in the EU.
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ETD revision website: Revision of the Energy Tax Directive | European Commission (europa.eu)
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CBAM website: Carbon Border Adjustment Mechanism (europa.eu)
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CBAM Impact assessment: EUR-Lex - 52021SC0643 - EN - EUR-Lex (europa.eu)
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Fit for 55 package website: Carbon Border Adjustment Mechanism (europa.eu)
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ETD revision results presented at the Annual Research Conference 2022: European Commission - Annual Research Conference 2022 - Programme (europa.eu)
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Energy taxation project:
We also have a line of research that specifically focus on energy taxes, where we estimate implicit tax rates of each energy consumption category (e.g., natural gas, electricity, vehicle fuels, etc.), considering both VAT and excises, in a harmonized way for all EU Member States. With this information we are then able to disentangle the effect of tax rates, consumption patterns and regressivity on the overall redistributive effect of current tax rates on households' energy consumption. The first results based on EU-HBS 2015 and SILC-2015 with policy system 2019 can be found in the published paper "Taxing Households Energy Consumption: its tax burden and redistributive effect".
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