Local air pollution and global climate change taxes: a distributional analysis

The study finds that taxes on local air pollutants are more regressive than those on climate change pollutants because they increase the prices of basic necessities, such as food and electricity, which occupy a larger share of low-income household budgets. While a CO2 tax was found to be nearly proportional across income deciles, the LAP tax disproportionately affected the poorest households. Revenue recycling through reduced social security contributions improved overall economic efficiency but tended to worsen the distributional equity, particularly for the GCC tax scenario.

• Taxes on local air pollutants (LAP) are more regressive than taxes on global climate change (GCC) pollutants because the goods they implicitly tax have a higher weight in the consumption baskets of low-income groups.
• The GCC tax, based on a rate of €25 per ton of carbon, is found to be almost perfectly proportional, with welfare losses of approximately 0.8% across all expenditure deciles.
• The LAP tax causes a higher average welfare loss than the GCC tax, with the poorest households losing approximately 1.2% of welfare compared to 0.9% for the richest households.
• The regressivity of the LAP tax is primarily driven by its impact on the food sector, as it increases food prices more than the GCC tax does, and low-income households spend a larger proportion of their income on food.
• Revenue recycling via a reduction in social security contributions paid by employers increases overall fiscal efficiency and reduces welfare loss for all groups, but it makes the tax system more regressive.
• Energy-intensive sectors, specifically electricity, water, and gas production, experience the highest price increases under both tax scenarios, with increases exceeding 7.5%.

APA

Garcia-Muros, X., Burguillo, M., Gonzalez-Eguino, M., & Romero-Jordán, D. (2014). Local air pollution and global climate change taxes: a distributional analysis. Basque Centre for Climate Change. https://www.bc3research.org/h6T8Uy8Nm4gFs0O/201402190342081652526829.pdf

Chicago

Garcia-Muros, Xaquín, Mercedes Burguillo, Mikel Gonzalez-Eguino, and Desiderio Romero-Jordán. Local air pollution and global climate change taxes: a distributional analysis. Basque Centre for Climate Change, 2014. https://www.bc3research.org/h6T8Uy8Nm4gFs0O/201402190342081652526829.pdf.

Wikipedia

{{cite report |last1=Garcia-Muros |first1=Xaquín |last2=Burguillo |first2=Mercedes |last3=Gonzalez-Eguino |first3=Mikel |last4=Romero-Jordán |first4=Desiderio |title=Local air pollution and global climate change taxes: a distributional analysis |publisher=Basque Centre for Climate Change |date=February 2014 |url=https://www.bc3research.org/h6T8Uy8Nm4gFs0O/201402190342081652526829.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{garciamuros2014local, author = {Garcia-Muros, Xaquín and Burguillo, Mercedes and Gonzalez-Eguino, Mikel and Romero-Jordán, Desiderio}, title = {{Local air pollution and global climate change taxes: a distributional analysis}}, institution = {Basque Centre for Climate Change}, year = {2014}, month = feb, url = {https://www.bc3research.org/h6T8Uy8Nm4gFs0O/201402190342081652526829.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }