Economic, ecological and social benefits through redistributing revenues from increased mineral oil taxation in Austria: A triple dividend

Abstract

To meet the future energy and climate targets in 2030 and 2050 in Austria, it is absolutely necessary to apply extensive measures to reduce the use of fossil fuels. By then, Austria will have to realize a 36% decrease (from 2005 levels) for emission sources outside the European Emission Trading System. The transport sector is a key driver of recently increasing greenhouse gas emissions in Austria. Hence, we examine the macroeconomic and ecologic impacts of an environmental tax reform in Austria from 2020 to 2030. We implement a revenue-neutral tax reform that raises revenues via an increase of the mineral oil tax on diesel and petrol consumption and redistributes these fiscal revenues to the industry and households. In addition, increased fossil fuel taxing would enhance revenues for green investments in e-mobility and thermal refurbishment that stimulate the Austrian economy. The simulation analyses focus on central macroeconomic variables as gross domestic product, employment, investment and private consumption and carbon dioxide emissions. We find that the proposed environmental tax reform generates a triple dividend, leading simultaneously to economic growth and the reduction of greenhouse gas emissions while low-income households can be fully compensated.