Carbon taxation and related vulnerability of Spanish urban and rural households in a regional level

Consumer decisions are essential in reducing CO₂ emissions released by human activities. Climate policies aimed at reducing consumers' carbon footprint require societal embrace and leaving no one behind; however, they often negatively affect low-income families and rural households with limited access to low-carbon consumption choices. In this paper, we estimate households' carbon footprint in Castilla-La Mancha (Spain) by urban-rural location and expenditure attributes and simulate the impacts of a carbon tax on the disposable income of different types of households. A novel multiregional input-output model is proposed to assign global carbon footprints to products (instead of industries), leading us to identify the main driving goods in the carbon footprint of each type of household, evaluating the household's vulnerability after carbon taxation. Our findings suggest that high-spending households would face the taxation strongest effects on car fuels and transport services, as they would have an impact of 2 % of their total expenditure by the taxation on these products, while this effect in lower-income households would be 0,75 %. A tax on basic housing services (electricity and heating) would have a regressive impact, undermining the consumption level of vulnerable households. They would be affected by 2,5 %, while higher income households would spend between 1 and 1,5 % of their total expenditure on paying the carbon tax on this product. This heterogeneity across households leads us to recommend taxes and compensation mechanisms charged on adequate products to reduce the carbon footprint of households while avoiding the regressivity of climate policies and reducing urban-rural inequalities.