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The Poverty and Distributional Impacts of Carbon Pricing: Channels and Policy Implications

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  • Baoping Shang

Abstract

Addressing the poverty and distributional impacts of carbon pricing reforms is critical for the success of ambitious actions in the fight against climate change—from both the political economy perspective and the social welfare perspective. This article systematically reviews the following four channels through which carbon pricing can potentially affect poverty and inequality: consumption, income, health, and revenue recycling. It finds that the channels differ in important ways along several dimensions; as such, a blanket assessment of whether carbon pricing is progressive or regressive may have limited value in informing policy designs. The article also identifies several key gaps in the current literature and discusses how policy designs could take into account the attributes of the channels in mitigating the impacts of carbon pricing reforms on households.

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  • Baoping Shang, 2023. "The Poverty and Distributional Impacts of Carbon Pricing: Channels and Policy Implications," Review of Environmental Economics and Policy, University of Chicago Press, vol. 17(1), pages 64-85.
    • Handle: RePEc:ucp:renvpo:doi:10.1086/723899
    DOI: 10.1086/723899
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    Cited by:

    1. Kpodar, Kangni & Liu, Boya, 2022. "The distributional implications of the impact of fuel price increases on inflation," Energy Economics, Elsevier, vol. 108(C).
    2. Sterner, Thomas & Ewald, Jens & Sterner, Erik, 2024. "Economists and the climate," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 109(C).
    3. 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.
    4. Abigail Opokua Asare & Laura Schuerer, 2024. "Incidence of Carbon Pricing in Tanzania: Using Revenues to Empower Low-Income Households with Renewable Energy," Working Papers V-446-24, University of Oldenburg, Department of Economics, revised Jul 2024.

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