Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/279258 
Year of Publication: 
2023
Series/Report no.: 
CESifo Working Paper No. 10508
Version Description: 
This Version: July 2023
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
This paper provides a comprehensive evaluation of the world's largest environmental tax reform. We compare carbon and air pollutant emissions of the German transport sector and synthetic counterfactuals following the 1999 eco-tax reform, and find average reductions in external damages of around 80 billion Euros. We further show that the eco-tax induced low-carbon innovation and document much stronger demand responses to eco-tax increases than to market price movements, primarily driven by increased tax salience in newspapers. Our results highlight the key roles of salience and fuel substitution in mediating the effectiveness of fuel taxes to deliver climate and health benefits.
Subjects: 
environmental policy
fuel tax
carbon tax
tax elasticity
salience
fuel substitution
innovation
climate
pollution
health
JEL: 
Q58
H23
I18
R48
Document Type: 
Working Paper
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