Policymakers will not accept forceful decarbonisation policies if they lead to visibly increasing inequality within their societies. The distributive effects of climate policies need to be addressed. This report provides a selective review of recent academic literature and experience on the distributional effects of climate policies.
Governments around the globe have begun to implement various actions to limit carbon emissions and so, combat climate change. This book brings together some of the leading scholars in environmental and climate economics to examine the distributional consequences of policies that are designed to reduce these carbon emissions. Whether through a carbon tax, cap-and-trade system or other mechanisms, most proposals to reduce carbon emissions include some kind of carbon pricing system Ð shifting the costs of emissions onto polluters and providing an incentive to find the least costly methods of abatement. This standard efficiency justification for pricing carbon also has important distributional consequences Ð a problem that is often ignored by economists while being a major focus of attention in the political arena. Leading scholars in environmental and climate economics take up these issues to examine such questions as: Will the costs fall on current or future generations? Will they fall on the rich, poor, middle class, or on everyone proportionally? Which countries will benefit, and which will suffer? Students and scholars interested in climate change, along with policy makers, will find this lively volume an invaluable addition to the quest for information on this globally important issue.
This book builds upon existing literature to simultaneously examine disparities in the distribution of environmental impacts of environmental policy and in the distribution of financial effects among households.
This paper reviews the literature on the distributional effects of environmental and climate policies, focusing on ex-post empirical evidence. It decomposes the distributional effects into the main dimensions to understand which policy packages are more likely to achieve a triple dividend of environmental effectiveness, economic efficiency and equity. This paper also takes stock of the related literature on the political acceptability of environmental policies to assess proposals of compensation policy packages, including green recovery plans, environmental tax reforms and progressive subsidies to green technologies.
Addressing the poverty and distributional impacts of carbon pricing reforms is critical for the success of ambitious actions in the fight against climate change. This paper uses a simple framework to systematically review the channels through which carbon pricing can potentially affect poverty and inequality. It finds that the channels differ in important ways along several dimensions. The paper also identifies several key gaps in the current literature and discusses some considerations on how policy designs could take into account the attributes of the channels in mitigating the impacts of carbon pricing reforms on households.
The specific focus of this seminal work is on the economic impact of climate change on agriculture world wide, and how faced with the resultant environmental alterations, agriculture might adapt under varied and varying conditions. Enhanced with a detailed and comprehensive index, Climate Change and Agriculture is highly recommended for academic library environmental studies and economic studies reference collections and supplemental reading lists. The Midwest Book Review Despite its great importance, there are surprisingly few economic studies of the impact of climate on agriculture and how agriculture can adapt under a variety of conditions. This book examines 22 countries across four continents, including both developed and developing economies. It provides both a good analytical basis for additional work and solid results for policy debate concerning income distributional effects such as abatement, adaptation, and equity. Agriculture and grazing are a central sector in the livelihood of many people, particularly in developing countries. This book uses the Ricardian method to examine the impact of climate change on agriculture. It also quantifies how farmers adapt to climate. The findings suggest that agriculture in developing countries is more sensitive to climate than agriculture in developed countries. Rain-fed cropland is generally more sensitive to warming than irrigated cropland and cropland is more sensitive than livestock. The adaptation to climate change results reveal that farmers make many adjustments including switching crops and livestock species, adopting irrigation, and moving between livestock and crops. The results also reveal that impacts and adaptations vary a great deal across landscapes, suggesting that adaptation policies must be location specific. Finally, the book suggests a research agenda for the future. Economists in academia and the public sector, policy analysts and development agencies will find this broad study illuminating.
To avoid catastrophic effects on natural and human systems, bold action needs to be taken rapidly to mitigate climate change. Despite this urgency, the currently implemented and planned climate mitigation policies are not sufficient to meet the global targets set in Paris in 2015. One reason for their current inadequate rollout is their perceived negative distributional effects: by increasing the price of goods, climate mitigation policies may increase both poverty and inequality. In addition, they may disrupt labour markets and increase unemployment, especially in sectors and areas dependent on fossil fuels. As a result, public protests in many countries have so far blocked or delayed the implementation of climate policies. New avenues of research, discussed in this Briefing Paper, are turning the tide. First, it has been shown that carbon pricing may not be regressive in developing countries, contrary to the evidence in advanced economies. In a similar positive direction, findings from global-level and cross-country studies assessing the effects of climate mitigation policies on labour markets estimate that reaching climate goals will actually generate a small net increase in jobs. Nonetheless, the price effect of carbon pricing and the impact on the labour market of climate policies will both create losers: increases in prices would worsen poverty as lower-income households would need to pay more to purchase the same goods; similarly, specific countries, sectors, areas and workers (such as low-skilled ones) will witness job disruption or loss. Second, social protection policies can be implemented to compensate households and workers negatively affected by climate policies and to address negative distributional effects. Compensation for higher prices can be achieved through the use of cash transfers to households, which can be funded by revenues from climate policies such as carbon taxes. Full compensation can be achieved by using only a small share (about 30%-50% according to case studies) of the tax revenues generated. The remaining share could be used for other purposes, such as climate-friendly investments. Similarly, when looking at labour market effects, social protection, especially labour market policies such as retraining and unemployment relief, become critical in addressing the needs of negatively affected workers. Clearly, the achievement of environmental and social goals need not be mutually exclusive. With appropriate policy mixes, both poverty and environmental degradation can be reduced. This policy implication needs to be communicated more widely to increase the acceptance of climate polices. This is partially already achieved by recent plans such as the European Green Deal. From a research and policy perspective, more studies in developing countries are needed, including evidence on non-market climate policies and extending beyond the short-term effect of higher prices on the purchasing power of households. Finally, international cooperation can play an important role in policy coordination, financing and building social protection systems in lower-income countries.
