The fiscal and socioeconomic impact of the energy transition in the transport sector: The case of the Basque Country

This paper analyses the fiscal challenges of the climate-neutral economy transition by 2050 in line with the European Green Deal's goals. It focuses on the regional level and examines the Basque Country, one of the sub-state entities with the greatest fiscal power in the European Union, and aims to quantify the implications of decarbonising the transport sector for public finances. To this end, it applies DERIO, a dynamic econometric New Keynesian Input-Output model, designed to evaluate the economic effects of scenarios and policies at regional level, particularly those related to energy and climate change. Our analysis indicates that transport electrification increases revenues from taxes on production, income, wealth, and corporate profits, as well as social-security contributions. However, it reduces receipts from taxes on products and yields an overall net decline in public revenues. The results highlight the complex, cross-sectoral transmission mechanisms at play during the transition and offer actionable insights for designing revenue-stable fiscal frameworks in the face of large structural changes.