Heliyon (Nov 2023)
Taxing for a better life? The impact of environmental taxes on income distribution and inclusive education
Abstract
This paper examines the impact of environmental taxes on economic and social inequalities using data from 38 OECD countries from 1994 to 2020. The results show that the introduction of an environmental tax can have unequal consequences on population groups due to differences in consumption behaviour and access to environmental alternatives. The results also indicate that environmental taxes with a progressive character (i.e. higher for higher income households) can reduce inequalities and improve environmental efficiency. The introduction of environmental taxes should therefore be done with care and with due regard to their impact on inequality. Tax policies must be designed to protect the most vulnerable households and promote equity while protecting the environment. Thus, environmental taxation should be accompanied by social and economic policies that reduce inequalities and support the most affected social groups. It is also important for governments to have better communication and awareness-raising on the impacts of environmental taxation on inequalities, in order to ensure a just transition towards sustainable lifestyles.
