TY  - UNPD
A1  - Hänsel, Martin C.
A1  - Franks, Max
A1  - Kalkuhl, Matthias
A1  - Edenhofer, Ottmar
T1  - Optimal carbon taxation and horizontal equity
T2  - CEPA Discussion Papers
N2  - We develop a model of optimal carbon taxation and redistribution taking into account horizontal equity concerns by considering heterogeneous energy efficiencies. By deriving first- and second-best rules for policy instruments including carbon taxes, transfers and energy subsidies, we then investigate analytically how horizontal equity is considered in the social welfare maximizing tax structure. We calibrate the model to German household data and a 30 percent emission reduction goal. Our results show that energy-intensive households should receive more redistributive resources than energy-efficient households if and only if social inequality aversion is sufficiently high. We further find that redistribution of carbon tax revenue via household-specific transfers is the first-best policy. Equal per-capita transfers do not suffer from informational problems, but increase mitigation costs by around 15 percent compared to the first- best for unity inequality aversion. Adding renewable energy subsidies or non-linear energy subsidies, reduces mitigation costs further without relying on observability of households’ energy efficiency.
T3  - CEPA Discussion Papers - 28 
KW  - carbon price
KW  - horizontal equity
KW  - redistribution
KW  - renewable energy subsidies
KW  - climate policy
KW  - just transition
Y1  - 2021
UR  - https://publishup.uni-potsdam.de/frontdoor/index/index/docId/49812
UR  - https://nbn-resolving.org/urn:nbn:de:kobv:517-opus4-498128
SN  - 2628-653X
IS  - 28
ER  -