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Residential CO2 Emissions in Europe and Carbon Taxation: A Country-Level Assessment

This paper examines the determinants of residential CO2 emissions, which are not covered by the European Union Emissions Trading System (EU ETS), in 19 European countries between 2000-2017. Using both static and dynamic panel models, we found strong relationships between CO2 emissions per capita, GDP per capita, energy prices and heating needs. We then assessed the impact of European carbon taxation and show that a €20/tonne CO2 tax lowers emissions by 1% on average. We found that this tax affects countries differently in terms of tax revenue-to-GDP ratio. Poland and the Czech Republic would have to pay the highest contribution, and Portugal and Denmark the lowest. Finally, we propose a scenario that equalizes countries' tax burdens. We show that, were Europe to redistribute all tax revenues, the main beneficiaries would be Poland and Belgium, while Denmark and Luxembourg would have to pay a surtax.

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Keywords: CO2 emissions, Residential Sector, Panel data, Energy prices, Carbon tax

DOI: 10.5547/01956574.44.4.dcha

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Published in Volume 44, Number 5 of the bi-monthly journal of the IAEE's Energy Economics Education Foundation.


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