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After completing a bachelor’s degree in political science at Sciences Po. and a master’s and PhD in economics at the Paris School of Economics, Douenne started as an Assistant professor at the Amsterdam School of Economics in 2020. His main research area addresses the varying impact of environmental policies on different income groups and the resulting effect on support for those policies.

Measures are hardest on the less advantaged

An appealing policy measure is a tax on CO2 emissions. 'A carbon tax affects the less fortunate in society more than those who are doing well. In other words, the tax burden tends to be skewed towards poorer households,' the researcher explains.

A carbon tax has such a differential impact that there will always be some people who are hit disproportionately hard.

Such an inequitable outcome can be averted by channeling the higher tax revenues collected by the tax authorities back to households. 'Such transfers would be enough to compensate an average poor household, but would maintain the incentives to reduce pollution', according to Douenne.
But what Douenne’s research also shows is that, even within lower income groups, a carbon tax has such a differential impact that there will always be some people who are hit disproportionately hard. As Douenne points out: 'It’s almost impossible to prevent a significant share of lower income earners from being seriously hurt by the policy and some higher income earners from actually benefitting.'

For this reason, a key recommendation flowing from earlier research by Douenne is the need to look at differences not only between but also within income groups.

Investigating societal support

Other research carried out by Douenne has focused on societal support for environmental policies and the accompanying measures. 'The objective of this work was to understand why people are often opposed to carbon taxation. We studied this in the context of the Yellow Vests movement (mouvement des gilets jaunes), which arose in France in 2018 and strongly opposed the earlier introduction of a carbon tax.'

Would people have opposed carbon taxation if the tax had been designed differently, accounting for its distributional effects? Douenne observes: 'Most people were basically convinced that they were hit harder than the average citizen. They believed this even when we were able to show them quantitatively ‒ using estimates ‒ that they would benefit.'

The research also showed that those who supported the Yellow Vests movement were more pessimistic about the effect of a carbon tax than those who did not. 'The degree to which a person could be linked to the movement appeared to be a good predictor of his or her attitude towards the introduction of a carbon tax. What’s more, of all the variables that were studied, that link turned out to be the best predictor!'

Second-best climate economic model

The research that is keeping Douenne occupied at the moment is about optimal fiscal policy in a second-best climate-economy model. The objective is to determine how to adjust labor and capital income taxes when a carbon tax is introduced. Why second-best? “First-best fiscal policy means that the government can fix specific tax rates for each individual”, says the economist. “But that is of course not feasible: the same tax regulations apply to all individuals. Second-best then refers to the best fiscal policy that takes into account our inability to incorporate individual conditions into tax legislation.” Douenne hopes that, in a few months’ time, he will be able to turn the first research results into an initial paper.

In the meantime, he will also be lecturing on environmental economics and policies and other subjects at the Amsterdam School of Economics as part of the master’s programme. Douenne notices a growing interest in climate and sustainability issues in the lecture theatre. 'I am glad to see that the current generation of students is so concerned with environmental policy and climate economics.'