We calculate the expected distributional effects of the European Emissions
Trading System combining industry and household-level data. By combining data
on direct CO2 emissions by production sector from the German Environmental
Account with the German Input-Output Accounts, we calculate the CO2 intensity
of each sector covered by the EU ETS. We focus on the impact of price
increases in the electricity sector, both directly in the form of higher
electricity bills for consumers and indirectly through products that use
electricity as an input to production. Distributional effects of price
increases are analyzed on the basis of the German Income and Expenditure
Survey for the year 2008 data and updated to 2013. We confirm the ex-ante
expected regressive effect, which is, however, both rather small in magnitude
and can be offset and even more than offset by revenue recycling, in
particular the reduction of social security contributions on labour income
