The distributional effects of fuel duties: The impact on rural households in Scotland

Whilst recent empirical estimates suggest that the impact of a fuel duty increase on the cost of living of rural households will be small, the average nature of these estimates masks the facts that there are certain types of rural households who will be significantly adversely affected. This policy review considers how the impact of fuel duties differs between households, combining estimates from economic studies with findings from a recent study on car dependence in rural Scotland. It is argued that the impact of increased duties will vary significantly according to a number of factors and that revenue from the tax should be used to improve transport alternatives for those households most adversely affected. This will, in turn, help to achieve the desired objectives of the policy instrument of a shift from cars to more sustainable, alternative modes of transport.