The Distributional Effects of Environmental Policy

The Distributional Effects of Environmental Policy

Edited by Ysé Serret and Nick Johnstone

This publication is a milestone in the analysis of the distributional impacts of environmental policy, building upon existing literature to simultaneously examine disparities in the distribution of environmental impacts and in the distribution of financial effects amongst households.

Chapter 8: Distributional Effects of Environmental Policy: Conclusions and Policy Implications

Ysé Serret and Nick Johnstone

Subjects: economics and finance, environmental economics, environment, environmental economics


8. Distributional effects of environmental policy: conclusions and policy implications Ysé Serret and Nick Johnstone Government concerns about the distributional effects of environmental policies generally arise when it is felt that a policy instrument is distributionally regressive, either in the sense that its financial burden falls disproportionately on lower-income households and/or in the sense that the environmental benefits are accrued disproportionately by higher-income households. Generally speaking, however, it is the distribution of financial effects that is likely to raise the most important political concerns. Taxes are usually perceived as being regressive and as a result are likely to face opposition from the public. The public demonstrations that resulted from planned increases in energy taxation in several European countries in 2000 are an illustration. A more recent example is the strong reaction to charges for environmental waste collection services in Ireland as well as the Irish Government’s decision in 2004 to abandon the proposed carbon taxation in the face of potential social impacts (see Box 8.3 below). Thus, addressing distributional effects can be a crucial element for a government in securing the political acceptance of environmental policy. All public policies are likely to have distributional effects of some kind, and the need to tackle distributional impacts associated with the introduction of environmental policies arises when the effects are significant. If the existing distribution of wealth and the public policy framework (tax schedules, social security schemes and so on) are thought to be ‘fair’,...

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