Guschanski, Alexander ORCID: https://orcid.org/0000-0002-7818-8264 and Wildauer, Rafael ORCID: https://orcid.org/0000-0001-6395-6286 (2025) Can a Wealth Tax reduce CO2 emissions in Europe? [Working Paper]

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Abstract

We analyse the potential of wealth taxes to reduce CO2 emissions through two transmission channels: the inequality channel, which links reductions in wealth inequality to lower emissions, and the consumption channel, which analyses how wealth taxes affect consumption by top wealth holders. We simulate the effects of various wealth tax designs over one- and ten-year horizons using harmonised microdata from 22 European countries. Our analysis accounts for survey non-response bias, heterogeneous rates of returns across households, and behavioural responses to taxation. We find that, through the inequality channel, an annual progressive wealth tax could reduce annual CO2 emissions by 7.5%–14.7% after ten years relative to a no-tax scenario, depending on tax progressivity. Through the consumption channel, the average reduction is between 1.5%–3.6%. These findings highlight the potential of wealth taxes to serve a dual purpose: curbing wealth concentration and contributing meaningfully to climate mitigation and justice, by focusing on high-net worth households who account for a disproportionate share of emissions.

Item Type:	Working Paper
Uncontrolled Keywords:	wealth tax, wealth distribution, environmental effect, CO2 emissions
Subjects:	H Social Sciences > H Social Sciences (General) H Social Sciences > HD Industries. Land use. Labor H Social Sciences > HJ Public Finance
Faculty / School / Research Centre / Research Group:	Greenwich Business School Greenwich Business School > Political Economy, Governance, Finance and Accountability (PEGFA) Journal of Economic Literature Classification > Political Economy, Governance, Finance and Accountability (PEGFA)
Last Modified:	10 Oct 2025 15:33
URI:	https://gala.gre.ac.uk/id/eprint/51227

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