Study finds higher gasoline taxes do not disproportionately impact the poor, especially in developing countries
Although increased gasoline taxation has been proposed as a very effective instrument to reduce greenhouse gas emissions, a common argument against such a measure is that it is regressive—i.e., it hits poor people the hardest. However, a new study by researchers at the University of Gothenburg (Sweden) finds that middle- and high-income earners are generally affected the most by gasoline taxes, especially in poor countries, rather than poor people.
Petrol taxes are effective and actually don’t affect poor people disproportionally. Powerful lobbyists have tried to undermine the whole idea of petrol taxes, claiming that the effects are too hard on the poor. Our results contradict this view, especially with respect to developing countries.—Thomas Sterner, Professor of Environmental Economics at the University of Gothenburg
Sterner is lead author in the UN climate panel’s (IPCC) working group Mitigation of Climate Change. Sterner is also the editor of the new book Fuel Taxes and the Poor, The Distributional Effects of Gasoline Taxation and Their Implications for Climate Policy, authored by 35 researchers.
The researchers studied data from 25 different countries to investigate the concern that gasoline taxes affect poor people the most. The team included leading researchers from China, India, Indonesia, USA, Latin America, as well as many countries in Africa and Europe.
The reason why the global climate negotiations are so slow has to do with global justice. Poor nations have not caused climate change and they want to be compensated rather than being forced to pay for adaptation and mitigation; they want their share of the atmospheric commons. Our research shows however, that increased fuel taxes are not, per se, incompatible with sustainable growth, reduced poverty and an improved climate.—Thomas Sterner
The researchers conclude that although in some high-income countries, particularly the US, gasoline taxes may indeed be regressive and affect the poor more, in most countries, and particularly in the poor, it is the middle-and high-income earners who are generally hit harder.
India, China and many African countries are examples where cars and fuels are luxury products. In many European countries such as Sweden, the gasoline tax is roughly neutral.
Sterner emphasizes that international climate negotiators should emphasize global justice and pay attention to distributional effects. “An increased petrol tax effectively reduces emissions of greenhouse gases from the transport sector, at the same time as it exemplifies these justice aspects.”
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.