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A Macro Study of the Unequal Effects of Climate Change

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  • Stephie Fried

Abstract

This paper develops a macro heterogeneous-agent model to quantify the distributional impacts of higher temperatures in the US. Households adapt to temperature by using energy and equipment for heating and cooling. A key insight is that temperature acts as a transfer from nature, augmenting household income by the value of heating or cooling provided by nature. The welfare effects of climate change vary substantially with income, increasing welfare inequality in the colder parts of the US. This heterogeneity results from the effects of climate change on transfers from nature and on households’ extensive-margin decisions to purchase heaters and air conditioners.

Suggested Citation

  • Stephie Fried, 2024. "A Macro Study of the Unequal Effects of Climate Change," Working Paper Series 2024-18, Federal Reserve Bank of San Francisco.
    • Handle: RePEc:fip:fedfwp:98315
    DOI: 10.24148/wp2024-18
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    References listed on IDEAS

    as
    1. Parry, Ian W. H., 2004. "Are emissions permits regressive?," Journal of Environmental Economics and Management, Elsevier, vol. 47(2), pages 364-387, March.
    2. Parry Ian W. H. & Williams Roberton C., 2010. "What are the Costs of Meeting Distributional Objectives for Climate Policy?," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 10(2), pages 1-35, December.
    3. Parry, Ian W.H. & Williams, Roberton C. III, 2010. "What Are the Costs of Meeting Distributional Objectives in Designing Domestic Climate Policy?," RFF Working Paper Series dp-10-51, Resources for the Future.
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    Keywords

    climate change; heterogeneous-agent model; temperature; welfare effects;
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