Green Tax Pass-Through to Retail Fuel Prices and Firm Heterogeneity: Evidence from France

Combining a natural experiment and high-frequency information on retail fuel prices, we investigate the level, dynamic, heterogeneity, and dependence of the passthrough of a green tax. The green tax's economic incidence passes largely to consumers but with significant heterogeneity across gas stations. The magnitude and speed of pass-through vary between 84% and 100%, and two and eleven days.

The frequency of price changes shapes the tax's incidence. Firms frequently adjusting prices pass through the tax, whereas those that do not, adjust their high markups due to strategic complementarities that slow down the pass-through according to a heterogeneousfirm model.