We investigate how fuel taxation reduces climate and pollution externalities by evaluating the world’s largest environmental tax reform. Using spatially detailed emissions data from more than 1,000 European regions in a synthetic difference-in-differences framework, we evaluate the impact of Germany’s 1999 ecological tax reform on transport-related carbon and air pollutant emissions. We document sizable aggregate reductions for all emissions, exceeding 10 percent on average per year relative to synthetic baselines. Using official damage valuations, we estimate avoided external costs of more than C100 billion, two-thirds of which stem from health benefits due to reduced air pollution. Emission reductions and associated monetized benefits are larger in lower-income regions, contrasting with a slightly regressive distribution of fuel costs. These findings underscore the importance of incorporating air quality co-benefits when evaluating the efficiency and distributional effects of fuel and carbon pricing.
The energy crisis following Russia’s invasion of Ukraine exposed the heightened vulnerability of low-income households to rising heating costs, particularly those in energy inefficient buildings. Using data from the German Socio-Economic Panel (SOEP), this study examines the distributional impact of heating costs across income deciles and evaluates the effectiveness of policy interventions. We find that low-income tenants are the most vulnerable segment of the population, with elevated risks of energy poverty. While carbon pricing with landlordtenant cost splitting shields low-income households from carbon costs, it fails to offset overall energy price increases. In contrast, a "Worst-First" retrofit strategy, prioritizing upgrades in the least efficient buildings, substantially reduces heating costs and mitigates energy poverty. Our findings highlight the need for targeted retrofit policies to ensure both equitable decarbonization and economic relief for vulnerable households.
Russia’s invasion of Ukraine in 2022 was accompanied by a significant reduction of its gas supply to Europe, causing sharp energy price surges and prompting governments to respond with public appeals and programs aimed at reducing consumption. This paper investigates the effects of price increases and non-monetary factors, such as public appeals and saving programs, on residential energy savings during the crisis. Using a unique building-level dataset on residential energy consumption and prices in Germany, we identify price-driven savings and energy price elasticities with a DiD-PSM approach. By comparing buildings that faced price increases to buildings with constant prices, we can isolate price-driven savings from contemporaneous non-monetary effects. Our findings reveal that while increased prices led to moderate short-run energy savings, the majority of observed savings were driven by non-monetary factors. Consequently, we identify a relatively low short-run price elasticity of residential heat energy demand of -0.07. Going beyond average effect estimation, we use two machine learning methods to calculate building-level price-driven and non-price-driven savings, then analyzing their variation with socio-economic characteristics using census data.
Circular economy is widely promoted to address environmental and resource challenges, yet material circularity remains limited. A key barrier—insufficiently addressed in the literature—is the inconsistent interpretation of CE across industrial stakeholders. This study examines how firms in the plastics and steel value chains define and implement CE, and how they perceive key enablers, constraints, and policy needs. Drawing on 31 semi-structured interviews with companies spanning four stakeholder groups, we capture perspectives across the full material loop. Our findings indicate a shared recognition of product design and producer responsibility but diverging views on regulation and limited coordination incentives. Reuse service providers emphasize consumer acceptance and information policies, while upstream actors stress technological capacity. By comparing two material sectors and mapping stakeholder-specific insights, this paper contributes to understanding institutional and operational barriers to CE and underscores the need for coherent, material-sensitive policy frameworks to support coordinated transitions across value chains.
Retrofit Costs and Subsidies, and their Distributional Impacts