Fuel Taxes and the Poor challenges the conventional wisdom that gasoline taxation, an important and much-debated instrument of climate policy, has a disproportionately detrimental effect on poor people.
– Raising fuel taxes could significantly reduce emissions of greenhouse gases and other pollution from the transportation sector. One of the prime arguments against raising fuel taxes is the perception that they are regressive – that they are more costly to the poor. But recent research suggests the opposite, particularly for developing countries, says Thomas Sterner.
Increased fuel taxes carry the potential to mitigate carbon emissions, reduce congestion, and improve local urban environment. As such, higher gasoline taxes could prove to be a fundamental part of any climate action plan. However, they have been resisted by powerful lobbies that have persuaded people that increased fuel taxation would be regressive. Reporting on examples of over two dozen countries, the recently released book Fuel Taxes and the Poor, The Distributional Effects of Gasoline Taxation and Their Implications for Climate Policy sets out to empirically investigate this claim.
The book is edited by Thomas Sterner and published by RFF Press, Resources for the Future in Washington DC (www.rff.org) with Environment for Development initiative. Among the 35 authors are prominent researchers from China, India, Indonesia, the USA, Latin America, several African countries and also Europe.
The authors conclude that while there may be some slight regressivity in some high-income countries, as a general rule, fuel taxation is a progressive policy particularly in low income countries. Rich countries can correct for regressivity by cutting back on other taxes that adversely affect poor people, or by spending more money on services for the poor. Meanwhile, in low-income countries, poor people spend a very small share of their money on fuel for transport. Some costs from fuel taxes may be passed on to poor people through more expensive public transportation and food transport. Nevertheless, in general the authors find that gasoline taxes become more progressive as the income of the country in question decreases.
The book provides strong arguments for the proponents of environmental taxation. It has immediate policy implications at the intersection of multiple subject areas, including transportation, environmental regulation, development studies, and climate change. The book was written as part of the Environment for Development initiative.
The editor Thomas Sterner is a Professor of Environmental Economics at the University of Gothenburg in Sweden and a University Fellow of Resources for the Future, Washington DC. He has published a dozen books and more than 75 journal articles.
Link to Routledge webpage about the book: http://www.routledge.com/books/details/9781617260926/
Fuel Taxes and the Poor, The Distributional Effects of Gasoline Taxation and Their Implications for Climate Policy (2011) Published by RFF Press with Environment for Development initiative. Edited By Thomas Sterner.