Distributional Effects of Environmental Taxes on Transportation

Abstract

This article deals with environmental and distributional effects from a differentiated tax system on a set of disaggregated transportation goods. Empirical examination of Norwegian data indicates that higher tax rates on high-pollution luxury modes of transportation such as air flights and taxis reduce inequality and increase environmental quality. Lower tax rates on low-pollution necessities such as buses, bicycles, and mopeds reduce inequality and increase environmental quality. Higher taxesor high-pollution necessities such as gasoline have favourableenvironmental effects, but increase inequality somewhat. Railway passenger transportation appears to be distributionally neutral. In order to interpret the estimates with respect to distributional and environmental concerns, use is made of a theory of distribution effects based on Engel, child, and adult elastricities and a wide range of empirical estimates of environmental hazards from transportation consumption. For different modes of transportation, an analysis is made of emissions per passenger-kilometer and per monetary unit.