Missbach, L., Steckel, J., Ward, H.

Assessing distributional effects of carbon pricing in Israel

in Energy Policy, 26.06.2023

Peer Review , Climate and Development

The government of Israel has announced its plan to introduce a national carbon price of ILS 130 (∼USD 40) per ton of CO2 in 2023. In this study, we analyse the subsequent distributional impacts on Israeli households. We build on the recent Household Budget Survey from 2018 compiled by the Israeli Central Bureau of Statistics and merge this data with sector-specific embedded carbon intensities derived from multi-regional input-output data. We find that without further measures a carbon price would have regressive effects on Israeli households. Using statistical analyses we show that rural households, Arab households or households that own (and use) a car would face additional costs above average. Redistributing revenues from carbon pricing could help to address socially unbalanced and unintended outcomes. We model various redistribution schemes after iterating with Israeli stakeholders. Compensating households with lump sum transfers or (partially) subsidizing electricity consumption could lead to progressive outcomes, while proposed policies to lower existing transport fuel taxes would exacerbate regressive distributional effects.