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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.
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Document type: Research paper