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Content archived on 2024-04-30

Economic and social implications of moving towards environmental sustainability through fiscal reform

Deliverables

Summary: The analysis of expenditure on ESGS showed patterns of total domestic energy consumption being comparable across the EEC 12. The low expenditure groups spend a higher percentage of their budgets on energy then the wealthy, but a lower percentage of their budgets on transport, especially vehicle purchases. However, all groups spend a much higher percentage of expenditure on transport than energy.
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.
Summary: The study of damages from pollution found evidence that applying tax measures to improve environmental quality may result in progressive distribution of the health benefits. In a case study of Berlin, the distribution of damages from exposure to some traffic induced air pollutants (interpreted both as exposure as well as health impacts) is clearly regressive. Differences in additional cancer cases e.g. due to road traffic induced air pollution were obtained between social groups in the order of magnitude of 2-4 in 10,000 inhabitants of Berlin per lifetime. This regressive distribution of damages can be "improved" by an EFR measure because this would ceteris paribus lead to an overall reduction of traffic and thus a reduction of exposure to air pollution. In principle, the same conclusion holds true for traffic induced noise. Due to the characteristic non-linear relationship between transport volume and noise the reductions in health risk (especially noise induced cardiovascular disease) are of clearly minor importance if compared to the effect on pollutant path.

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