Dr. Miguel Tovar Reaños:

Carbon taxes have been applied in different ways throughout Europe. For example, in some cases Nordic countries use the revenue for general purposes. These countries have the highest rates of carbon tax in Europe. In other countries such as France the revenue raised has been used to subsidise retrofitting schemes and the like, as mentioned by the Deputy. It really depends on the existing level of inequality in the relevant country and the level of transparency in the setting of the taxes. In general, our research shows that economic inequality is created if a tax is imposed on commodities such as fuel for transportation or heating and the money raised is not returned to people. Some households depend more heavily on these fuels, for example, those living in older houses or rural areas. It is important to return some of the revenue to protect poorer households and compensate for the regressive effects of commodity taxation.