De Bevere Audric - The Distributional Implications and Public Acceptability of the EU-ETS 2 in Belgium

• Presenting author: De Bevere Audric (UCLouvain - Saint-Louis - Bruxelles)

• Authors: De Bevere Audric, Grandjean Gilles

• Session: B02D - Energy - Tuesday 11:00-12:30 - Erika-Weinzierl Hall

• Slides: PDF

We have developed a microsimulation model that simulates the impact of the implementation of EU-ETS 2 on household fuel expenditures in Belgium. We first establish the regressivity of carbon pricing. However, when the carbon payments are redistributed equally among households, we find that the net monetary impact of the reform is slightly positive for low-income households, and slightly negative for high-income households. Nevertheless, we observe an important heterogeneity, with some households losing significantly in each income category. Those heating with oil, living in a house and owning at least one car are the most impacted. We show that the share of vulnerable households benefiting from a carbon price increases when the revenue collected is targeted towards specific groups. Also, energy poverty is better addressed if the transfer targets larger groups and is decreasing with income, or by combining lower energy prices (social discounts, VAT reduction) and direct transfers. In the absence of targeting, some well-identified groups could lose enough to seriously erode the public acceptability of such reform.