The heterogeneous incidence of fuel carbon taxes: Evidence from station-level data

Jarkko Harju, Tuomas Kosonen, Marita Laukkanen*, Kimmo Palanne

*Corresponding author for this work

Research output: Contribution to journalArticleScientificpeer-review

12 Citations (Scopus)
66 Downloads (Pure)


We use station-level price data and a significant diesel fuel carbon tax reform to study who bears the economic burden of fuel carbon taxes. We use a difference-in-differences strategy to estimate the pass-through of the large carbon tax increase to retail prices, where we compare retail diesel prices faced by private motorists to retail gasoline prices. We find that on average fuel carbon taxes are less than fully passed through to consumer prices, which suggests that consumers and the supply chain split the burden of these taxes. Using information on station location, we match price observations with postcode-level average incomes and measures of urbanization, and show that there are significant differences in the pass-through rate across areal incomes and between rural and urban areas up to one year after the reform. The effect of fuel carbon taxes on consumer prices decreases with areal income and with the degree of urbanization.

Original languageEnglish
Article number102607
Pages (from-to)1-33
Number of pages33
JournalJournal of Environmental Economics and Management
Early online date4 Jan 2022
Publication statusPublished - Mar 2022
MoE publication typeA1 Journal article-refereed


  • Carbon pricing
  • Carbon tax
  • Distributional effects
  • Fuel tax
  • Tax incidence


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