Working Paper: NBER ID: w16703
Authors: Don Fullerton
Abstract: While prior literature has identified various effects of environmental policy, this note uses the example of a proposed carbon permit system to illustrate and discuss six different types of distributional effects: (1) higher prices of carbon-intensive products, (2) changes in relative returns to factors like labor, capital, and resources, (3) allocation of scarcity rents from a restricted number of permits, (4) distribution of the benefits from improvements in environmental quality, (5) temporary effects during the transition, and (6) capitalization of all those effects into prices of land, corporate stock, or house values. The note also discusses whether all six effects could be regressive, that is, whether carbon policy could place disproportionate burden on the poor.
Keywords: No keywords provided
JEL Codes: H23; Q58
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| carbon policy (Q58) | prices of fossil fuel-intensive products (Q31) |
| prices of fossil fuel-intensive products (Q31) | low-income families (I32) |
| capital-intensive abatement technologies (Q52) | demand for capital (E22) |
| demand for capital (E22) | relative wages for low-income families (J31) |
| pollution permits (Q58) | scarcity rents (R21) |
| scarcity rents (R21) | wealthier individuals (D14) |
| improvements in environmental quality (Q56) | benefits valued differently across income groups (J32) |
| benefits valued differently across income groups (J32) | low-income individuals (I32) |
| cap-and-trade system (Q58) | differential impacts on employment (J68) |
| differential impacts on employment (J68) | low-income workers in traditional industries (J46) |
| effects of policies (F68) | asset prices (G19) |
| asset prices (G19) | current asset owners (G32) |