Ensuring a just energy transition: A distributional analysis of diesel tax reform in Spain with stakeholder engagement

Abstract

Despite the consensus that green taxation is an effective way to accelerate the decarbonization of economies, few countries are implementing ambitious tax reforms. This is the case of diesel for transport in Spain. The arguments against boosting the diesel tax stressed its potential adverse effects on the economy and society, accusing it of being a regressive policy. In this paper, we shed light on the distributional impact of raising the excise tax on diesel to the same level as on gasoline for final consumers in Spain and various compensation schemes jointly designed with several stakeholders. The results confirm that raising the diesel tax without offsets would have slightly regressive effects and that rural and middle-income households would bear the brunt of the increase. However, the effects become progressive when the co-designed offsetting schemes are implemented. These findings may help decision-makers in achieving a just, acceptable, and politically viable energy transition. © 2023 The Authors