Environmental Engel Curves and the Distributional Incidence of Environmental Taxation

• Authors: Jaume Freire González
• BSE Working Paper: 1610 | October 2026
• Keywords: Spain, land, carbon taxes, environmental engel curves, distributional incidence, resource taxation, water, nutrients, input-output, United States
• JEL codes: D12, D31, H23, Q25, Q52, Q58

Environmental taxes are extending from carbon to water, land, materials, and nutrients, yet their incidence is known mostly for carbon. We show that carbon, the externality already taxed at scale, is the least regressive of the five. Estimating environmental Engel curves on six waves of the Spanish Household Budget Survey (2006–2022) and the 2022 U.S. Consumer Expenditure Survey, we find that all five footprints are necessities in Spain, but water (elasticity 0.73) and land (0.73) far more than carbon (0.92). The gap comes from the goods that carry each externality: food carries water and land, while motor fuel carries much of carbon. Real instruments agree: a tax on water supply has a burden elasticity of 0.39, one on motor fuel 1.09. The ordering holds in every wave and most alternative specifications. In the United States, where motor fuel is closer to a necessity, carbon is more regressive (0.67).