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Who Pays Broad-Based Energy Taxes? Computing Lifetime and Regional Incidence

This paper measures the incidence of energy taxes using a lifetime framework to study both a Btu tax and a carbon tax. It takes into account two key facts. First, because energy taxes have different incidence effects across the life cycle, it is important to measure the burden of taxes in terms of lifetime incidence, not just their burden in a given year. To take account of lifetime incidence, we introduce an estimation methodology for lifetime-correction as well as showing current consumption measures. Second, energy taxes have a total effect that combines both direct and indirect effects: in addition to directly increasing the price of energy goods, energy taxes also indirectly increase the price of all other goods in proportion to the energy used to produce them. We provide incidence estimates by income group and by geographical region.

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Energy Specializations: Petroleum – Policy and Regulation; Energy Modeling – Other

JEL Codes:
E60 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook: General
C59 - Econometric Modeling: Other

Keywords: Energy taxes, BTU tax, Carbon tax, Lifetime income incidence framwork

DOI: 10.5547/ISSN0195-6574-EJ-Vol15-No3-8

Published in Volume15, Number 3 of The Quarterly Journal of the IAEE's Energy Economics Education Foundation.