Ladoux, Norbert and Scasny, Milan (2014) Energy Price and Redistribution in Czech Republic. TSE Working Paper, n. 14-527

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Abstract

This paper studies environmental taxation in a Mirrlees setting when energy, a polluting good, is used both as a factor of production and a final consumption good. The model is calibrated for the Czech economy. We study two different tax systems. Both consider a non-linear income tax but the first one considers a linear energy tax, while the second one allows for a non-linear taxation of energy. We show that: (i) households' energy consumption should be subsidized except if the environmental external costs of energy consumption are sufficiently high (ii) The subsidy applied to energy consumption should decrease with income.