Who pays for climate taxes on food? : a simulation of distributional effects in Sweden
2021
Säll, Sarah
In this study we investigated the distributional effect of climate taxes on food consumed in Sweden and we find that climate taxes on all foods are regressive and affect already exposed families such as single parents with several children, retired and unemployed the most. We used Compensating Variation (CV) for multiple price changes which results in sums that households need to be compensated with, not to feel their utility levels are decreased by the imposed taxes. The compensating sums were found by combining estimated hicksian demand elasticities, simultaneous price changes on 52 different food commodities and household data on food expenditures. Elasticities were calculated by the use of a three stage demand system and tax levels were based on LCA calculations of carbon equivalents from average goods consumed in Sweden. The results of the CV calculations depend on the initial consumption of the different commodities, but also on the number of commodities included in the study. The large number of commodities in this study makes it stand out in the literature, and we therefore put more weight on the relative effect between households, rather than total sums that would be needed to compensate households. The effects and the relations between households were calculated both on disposable income levels and total expenditures.
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