A Microsimulation Model of the Distributional Impacts of Climate Policies

Resources for the Future Discussion Paper 14-40

35 Pages Posted: 26 Jun 2015

See all articles by Hal Gordon

Hal Gordon

Resources for the Future

Dallas Burtraw

Resources for the Future

Roberton C. Williams

University of Maryland - Department of Agricultural & Resource Economics; National Bureau of Economic Research (NBER); Resources for the Future

Date Written: February 26, 2015

Abstract

Carbon policies introduce potentially uneven cost burdens. Anticipating these outcomes is important for policymakers seeking to achieve an equitable outcome and can be politically important as well. This paper describes the details of a microsimulation model that utilizes the price and quantity changes predicted by economic models of carbon policies to make an estimation of economic incidence by income quintile or state, and potentially across other dimensions. After taking as inputs the aggregate output from partial or general equilibrium economic modeling, the microsimulation model uses data from the Consumer Expenditure Survey (CE), the State Energy Data System (SEDS), the National Income and Product Accounts (NIPA), estimations from the Congressional Budget Office (CBO), and the Haiku electricity model. These data sources are used to estimate the share of consumer and producer surplus changes that accrue to households in each income quintile and state. The model is unique among existing incidence models in its ability to drill down to the level of state incidence and to plug into a wide range of economic models.

Keywords: carbon price, carbon tax, emissions tax, cap and trade, distributional effects, equity, efficiency, incidence

JEL Classification: H22, H23, Q52, Q54

Suggested Citation

Gordon, Hal and Burtraw, Dallas and Williams, Roberton C., A Microsimulation Model of the Distributional Impacts of Climate Policies (February 26, 2015). Resources for the Future Discussion Paper 14-40, Available at SSRN: https://ssrn.com/abstract=2622667 or http://dx.doi.org/10.2139/ssrn.2622667

Hal Gordon

Resources for the Future ( email )

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Dallas Burtraw (Contact Author)

Resources for the Future ( email )

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Roberton C. Williams

University of Maryland - Department of Agricultural & Resource Economics ( email )

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