Distributional Implications of Electricity Taxation: An Assessment using Household Survey Data from 11 OECD countries

This paper assesses the distributional implications of electricity taxation, using data from a 2011 survey of households in 11 OECD countries. Demand elasticities are estimated separately for the following household categories: income terciles, household location, type of residence, home ownership status and major heating source. Subsequently, change in dispersion of net (of electricity expenditure) income is computed and used as a summary measure of welfare change. The key results of the analysis are as follows. Welfare reduction due to electricity taxation, conceptualised as proportional tax scenarios of 2% and 5%, is very modest, and does not substantially increase when household demand is allowed to be heterogeneous across the above mentioned categories.