IDEAS home Printed from https://ideas.repec.org/a/nat/natcli/v11y2021i12d10.1038_s41558-021-01217-0.html
   My bibliography  Save this article

Climate action with revenue recycling has benefits for poverty, inequality and well-being

Author

Listed:
  • Mark Budolfson

    (Rutgers University)

  • Francis Dennig

    (Yale-NUS College)

  • Frank Errickson

    (University of California
    Princeton University)

  • Simon Feindt

    (Mercator Research Institute on Global Commons and Climate Change (MCC)
    Technische Universität Berlin)

  • Maddalena Ferranna

    (Harvard University)

  • Marc Fleurbaey

    (Paris School of Economics)

  • David Klenert

    (European Commission)

  • Ulrike Kornek

    (Mercator Research Institute on Global Commons and Climate Change (MCC)
    Potsdam Institute for Climate Impact Research)

  • Kevin Kuruc

    (University of Oklahoma)

  • Aurélie Méjean

    (CNRS, CIRED)

  • Wei Peng

    (Pennsylvania State University)

  • Noah Scovronick

    (Emory University)

  • Dean Spears

    (University of Texas)

  • Fabian Wagner

    (International Institute for Applied Systems Analysis (IIASA))

  • Stéphane Zuber

    (Centre d’Economie de la Sorbonne)

Abstract

Existing estimates of optimal climate policy ignore the possibility that carbon tax revenues could be used in a progressive way; model results therefore typically imply that near-term climate action comes at some cost to the poor. Using the Nested Inequalities Climate Economy (NICE) model, we show that an equal per capita refund of carbon tax revenues implies that achieving a 2 °C target can pay large and immediate dividends for improving well-being, reducing inequality and alleviating poverty. In an optimal policy calculation that weighs the benefits against the costs of mitigation, the recommended policy is characterized by aggressive near-term climate action followed by a slower climb towards full decarbonization; this pattern—which is driven by a carbon revenue Laffer curve—prevents runaway warming while also preserving tax revenues for redistribution. Accounting for these dynamics corrects a long-standing bias against strong immediate climate action in the optimal policy literature.

Suggested Citation

  • Mark Budolfson & Francis Dennig & Frank Errickson & Simon Feindt & Maddalena Ferranna & Marc Fleurbaey & David Klenert & Ulrike Kornek & Kevin Kuruc & Aurélie Méjean & Wei Peng & Noah Scovronick & Dea, 2021. "Climate action with revenue recycling has benefits for poverty, inequality and well-being," Nature Climate Change, Nature, vol. 11(12), pages 1111-1116, December.
    • Handle: RePEc:nat:natcli:v:11:y:2021:i:12:d:10.1038_s41558-021-01217-0
    DOI: 10.1038/s41558-021-01217-0
    as

    Download full text from publisher

    File URL: https://www.nature.com/articles/s41558-021-01217-0
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.
    File URL: https://libkey.io/10.1038/s41558-021-01217-0?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Antimiani, Alessandro & Costantini, Valeria & Paglialunga, Elena, 2023. "Fossil fuels subsidy removal and the EU carbon neutrality policy," Energy Economics, Elsevier, vol. 119(C).
    2. Mireille Chiroleu-Assouline, 2022. "Rendre acceptable la nécessaire taxation du carbone. Quelles pistes pour la France ?," Revue de l'OFCE, Presses de Sciences-Po, vol. 0(1), pages 15-53.
    3. Foramitti, Joël & Savin, Ivan & van den Bergh, Jeroen C.J.M., 2024. "How carbon pricing affects multiple human needs: An agent-based model analysis," Ecological Economics, Elsevier, vol. 217(C).
    4. Stern, Nicholas & Lankes, Hans Peter & Macquarie, Rob & Soubeyran, Éléonore, 2024. "The relationship between climate action and poverty reduction," LSE Research Online Documents on Economics 121231, London School of Economics and Political Science, LSE Library.
    5. John Bistlinea & Chikara Onda & Morgan Browning & Johannes Emmerling & Gokul Iyer & Megan Mahajan & Jim McFarland & Haewon McJeon & Robbie Orvis & Francisco Ralston Fonseca & Christopher Roney & Noah , 2024. "Equity Implications of Net-Zero Emissions: A Multi-Model Analysis of Energy Expenditures Across Income Classes Under Economy-Wide Deep Decarbonization Policies," Papers 2405.18748, arXiv.org.
    6. Zhang, Qishi & Li, Bo & Liu, Jing-Yu & Deng, Yizhi & Zhang, Runsen & Wu, Wenchao & Geng, Yong, 2024. "Assessing the distributional impacts of ambitious carbon pricing in China's agricultural sector," Ecological Economics, Elsevier, vol. 217(C).

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:nat:natcli:v:11:y:2021:i:12:d:10.1038_s41558-021-01217-0. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.nature.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.