The Distributional Impacts of Carbon Pricing on Households: A Literature Review

Xueyang Zhou

doi:10.54691/bcpbm.v34i.3185

Authors

Xueyang Zhou

DOI:

https://doi.org/10.54691/bcpbm.v34i.3185

Keywords:

Carbon pricing; emission reduction; distributional impacts; environmental policies.

Abstract

Assessing macroeconomic impacts is essential to the design of cost-effective market-based environmental policies. As carbon pricing instruments (CPIs) take the center of the stage for emission abatement, their regressive nature gains attention and becomes a potential political obstacle to their implementation. Numerous studies analyze the distributional impacts of CPIs in individual jurisdictions and obtain various results, but there lacks an integrated view of patterns and variations of the results. By reviewing existing literature, this study finds that CPIs are generally regressive in developed countries with a few exceptions. For developing countries, no unanimous outcome is reached, but the results could be generalized into predictable patterns given the economic structures of the jurisdictions and designs of CPIs.

Downloads

Download data is not yet available.

References

IPCC. Climate Change 2022 Impacts, Adaptation and Vulnerability. Intergovernmental Panel on Climate Change, 2022.

IPCC. Climate Change 2022: Mitigation of Climate Change, 2022.

The World Bank. State and Trends of Carbon Pricing 2022. World Bank, 2022.

IEA. World Energy Outlook 2021. IEA, 2021.

Dyarto R, Setyawan D. Understanding the political challenges of introducing a carbon tax in Indonesia. International Journal of Environmental Science and Technology, 2020, 18(6): 1479-1488.

Hamilton K, Cameron G. Simulating the Distributional Effects of a Canadian Carbon Tax. Canadian Public Policy, 1994, 20(4): 385.

Cornwell A, Creedy J. The Distributional Impact of Domestic Fuel Taxation. Economic Analysis and Policy, 1996, 26(2): 129-143.

Ohlendorf N, Jakob M, Minx JC, Schröder C, Steckel JC. Distributional Impacts of Carbon Pricing: A Meta-Analysis. Environmental and Resource Economics, 2020, 78(1): 1-42.

Wang Q, Hubacek K, Feng K, Wei YM, Liang QM. Distributional effects of carbon taxation. Applied Energy, 2016, 184:1123-1131.

Pigou AC. The Economics of Welfare. Macmillan, 1932.

Beck M, Rivers N, Wigle R, Yonezawa H. Carbon Tax and Revenue Recycling in British Columbia. SSRN Electronic Journal, 2014, 41(c): 40-69.

Brenner M, Riddle M, Boyce JK. Distributional impacts of carbon charges and revenue recycling in China. Energy Policy, 2007, 35(3): 1771-1784.

Hassett KA, Mathur A, Metcalf GE. The Incidence of a U.S. Carbon Tax. The Energy Journal, 2009, 30(2): 155-177.

Hahn RW, Stavins RN. Incentive-based environmental regulation: a new era from an old idea? Ecology Law Quarterly, 1991, 18(1): 1-42.

Jiang Z, Shao S. Distributional effects of a carbon tax on Chinese households: A case of Shanghai. Energy Policy, 2014, 73: 269-277.

Bovenberg AL, Goulder LH. Optimal Environmental Taxation in the Presence of Other Taxes. The American Economic Review, 1996, 86(4): 985-1000.

Metcalf GE. A Distributional Analysis of Green Tax Reforms. National Tax Journal, 1999, 52(4): 655-681.

Cramton P, Kerr S. Tradeable carbon permit auctions. Energy Policy, 2002, 30(4): 333-345.

Kerkhof AC, Moll HC, Drissen E, Wilting HC. Taxation of multiple greenhouse gases and the effects on income distribution. Ecological Economics, 2008, 67(2): 318-326.

Grottera C, Pereira AO, La Rovere EL. Impacts of carbon pricing on income inequality in Brazil. Climate and Development, 2015, 9(1): 80-93.

Santos G, Catchesides T. Distributional Consequences of Gasoline Taxation in the United Kingdom. Transportation Research Record: Journal of the Transportation Research Board, 2005, 1924(1): 103-111.

Feng K, Hubacek K, Guan D, Contestabile M, Minx J, Barrett J. Distributional Effects of Climate Change Taxation. Environmental Science & Technology, 2010, 44(10): 670-676.

Barnes P. Who Owns the Sky? Island Press, 2003.

Mathur A, Morris AC. Distributional effects of a carbon tax in broader U.S. fiscal reform. Energy Policy, 2014, 66: 326-334.

Poterba JM. Lifetime Incidence and the Distributional Burden of Excise Taxes. The American Economic Review, 1989, 79(2): 325-330.

Fullerton D, Metcalf GE. Tax Incidence. National Bureau of Economic Research, 2002.

Agostini CA, Jiménez J. The distributional incidence of the gasoline tax in Chile. Energy Policy, 2015, 85: 243-252.

Wier M, Birr-Pedersen K, Jacobsen HK, Klok J. Are CO2 taxes regressive? Evidence from the Danish experience. Ecological Economics, 2005, 52(2): 239-251.

Antón-Sarabia A, Hernández-Trillo F. Optimal gasoline tax in developing, oil-producing countries: The case of Mexico. Energy Policy, 2014, 67: 564-571.

Datta A. The incidence of fuel taxation in India. Energy Economics, 2010, 32(1): S26-S33.

Blackman A, Osakwe R, Alpizar F. Fuel tax incidence in developing countries: The case of Costa Rica. Energy Policy, 2010, 38(5): 2208-2215.

ESMAP. ESMAP Annual Report 2000-2001. World Bank, 2001.

Kpodar K. Distributional Effects of Oil Price Changes on Household Expenditures: Evidence from Mali. papers.ssrn.com, 2006.