The Incidence of U.S. Climate Policy: Where You Stand Depends on Where You Sit
71 Pages Posted: 24 Sep 2008 Last revised: 16 Oct 2008
Date Written: September 15, 2008
Abstract
Federal policies aimed to slow global warming would impose potentially significant costs on households that vary depending on the policy approach that is used. This paper evaluates the effects of a carbon dioxide cap-and-trade program on households in each of 11 regions of the country and sorted into annual income deciles. We find tremendous variation in the incidence (the distribution of cost) of the policy. The most important feature that affects households is how the policy distributes the value created by placing a price on CO2 emissions. We evaluate 10 policy alternatives that yield results that range from moderately progressive (expansion of the Earned Income Tax Credit, investments in efficiency and cap-and-dividend) to severely regressive (reduce income taxes, free distribution to incumbent emitters and reduction of the payroll tax). To varying degrees the allocation of the value of emissions allowances amplifies or potentially resolves the tradeoff between equity and efficiency.
Keywords: cap-and-trade, allocation, distributional effects, cost burden, equity
JEL Classification: H22, H23, Q52, Q54
Suggested Citation: Suggested Citation
Do you have a job opening that you would like to promote on SSRN?
Recommended Papers
-
By Don Fullerton and Gilbert E. Metcalf
-
Assessment of U.S. Cap-and-Trade Proposals
By Sergey Paltsev, John M. Reilly, ...
-
Lifetime Incidence and the Distributional Burden of Excise Taxes
-
By A. Lans Bovenberg, Lawrence H. Goulder, ...
-
Environmental Taxes and the Double-Dividend Hypothesis: Did You Really Expect Something for Nothing?
By Don Fullerton and Gilbert E. Metcalf
-
The Incidence of a U.S. Carbon Tax: A Lifetime and Regional Analysis
By Kevin A. Hassett, Aparna Mathur, ...
-
The General Equilibrium Incidence of Environmental Taxes
By Don Fullerton and Garth Heutel
-
The General Equilibrium Incidence of Environmental Mandates
By Don Fullerton and Garth Heutel
-
The Incidence of Pollution Control Policies
By Ian W. H. Parry, Hilary Sigman, ...