Unveiling households’ vulnerabilities across regions and generations in Spain: a carbon tax and compensation approach

Abstract This study investigates the distributive effects of carbon taxation on household consumption in Spain, with a particular focus on regional and demographic disparities. By applying a multiregional input–output model across Spain’s seventeen autonomous communities and incorporating household heterogeneity, the paper evaluates the regressivity of a carbon tax imposed on all emissions embodied in final household demand. The analysis simulates a carbon tax of €100 per ton of CO₂, assuming full pass-through to consumer prices, resulting in an average increase of 3.9% in household expenditure. The findings confirm the regressive nature of the tax, as households in lower-expenditure and less densely populated regions experience a disproportionately higher burden. Moreover, the study reveals demographic variations: younger households are more affected by transport-related taxes, while older households face greater impacts from housing-related emissions, regardless of household composition.To address these inequalities, the paper explores various compensation mechanisms. It demonstrates that while incorporating social criteria—such as household structure or age—can reduce regressivity, these measures alone are insufficient. A more equitable outcome requires the integration of economic variables into the design of compensation schemes. The study concludes that public acceptance of carbon taxation hinges on the implementation of well-targeted, transparent, and economically informed redistribution policies. These findings contribute to the broader discourse on climate policy by highlighting the importance of balancing environmental objectives with social equity considerations in the design of fiscal instruments.