The distributional implications of a carbon tax in the transportation sector in Barcelona: a micro-econometric simulation analysis of the potential effects on different socio-economic groups and its policy implications

Abstract

Climate change and the possible tools to mitigate it have been at the center of public debate for the last decades. One of the most interesting instruments is the carbon tax. Besides its effectiveness, the distributional impact plays an important role when considering introducing this tool. In this study, we do a literature review about the effects of the carbon tax and analyze the potential distributional impact of introducing a carbon tax of 70€ for the ton of CO2 used in the private transportation sector in Barcelona. The study approaches the implementation of a tax on gasoline expenditure, instead of a vehicle tax or a tax on emissions. Using a simplified sample of 1,068 observations of Barcelona households, with different incomes and gasoline expenditures and elasticities depending on their income deciles, we find that the tax is regressive. However, compared with the current environmental policies applied in the capital of Catalonia and the tools to reduce the regressivity of this policy, a carbon tax as proposed on fuel, would end up increasing the progressivity of public intervention in Barcelona.