Summary:
The main findings of the overall European analysis (using the E3ME model) were that revenue neutral increase in domestic energy and vehicle fuel taxes, recycled into the economy via reductions in employers` taxes, would have a number of beneficial effects. In addition the reduction in CO2 emissions (10% by design in the pan-European analysis), there would be an increase in real personal disposable incomes and employment.
By 2010, real personal disposable incomes were 2% above baseline and employment is 1.3% above, assuming that the change is tax-revenue-neutral, with employers` contributions to social security schemes being reduced to compensate for the additional revenues from excise duties. However, without deliberate further policy changes to redirect the extra incomes towards the more vulnerable socio-economic groups, the change will be weakly regressive for nearly all the Member States in the study. Although low expenditure households might be expected to experience an increase in real income following this limited ecotax reform, high expenditure households experience an even greater increase.