Climate Policy and Inequality in Urban Areas: Beyond Incomes

27 Pages Posted: 28 Jun 2023

See all articles by Charlotte Liotta

Charlotte Liotta

CIRED, International Research Center on Environment & Development, France; affiliation not provided to SSRN; Technische Universitat Berlin

Paolo Avner

World Bank

Vincent Viguie

CIRED, International Research Center on Environment & Development, France

Harris Selod

National Institute for Agricultural Research (INRA); National Institute of Statistics and Economic Studies (INSEE) - Center for Research in Economics and Statistics (CREST); The World Bank; Paris School of Economics (PSE); World Bank - Development Research Group (DECRG)

S. Hallegatte

World Bank

Abstract

Opposition to climate policies is partly due to their impacts on inequality. But with most economic studies focused on income inequalities, the quantitative spatial effect of economic climate policy instruments is poorly understood. Here, using a model derived from the standard urban model of urban economics, we simulate a fuel tax in Cape Town, South Africa, decomposing its impacts by income class, housing type, and location, and over different timeframes, assuming that agents gradually adapt. We find that in the short term, there are both income and spatial inequalities, with low-income households or suburban dwellers more negatively impacted. These inequalities persist in the medium and long terms, as the poorest households, living in informal or subsidized housing, have few or no ways to adapt to fuel price increases by changing housing type, size or location, or transportation mode. Low-income households living in formal housing are also impacted by the tax over the long term due to complex effects driven by competition with richer households in the housing market. Complementary policies promoting a flexible labor market, affordable public transportation, or subsidies that help low-income households live closer to employment centers will be key to the social acceptability of climate policies.

Keywords: Urban Economics, Land Use - Transport Integrated Models, Fuel Taxation, Emission Mitigation, Redistributive Impacts, Housing Markets

Suggested Citation

Liotta, Charlotte and Liotta, Charlotte and Avner, Paolo and Viguie, Vincent and Selod, Harris and Hallegatte, Stephane, Climate Policy and Inequality in Urban Areas: Beyond Incomes. Available at SSRN: https://ssrn.com/abstract=4494028 or http://dx.doi.org/10.2139/ssrn.4494028

Charlotte Liotta (Contact Author)

CIRED, International Research Center on Environment & Development, France ( email )

Campus du Jardin Tropical
45 bis avenue de la Belle Gabrielle
F94736 Nogent sur Marne Cedex
France

affiliation not provided to SSRN ( email )

No Address Available

Technische Universitat Berlin ( email )

Berlin
Germany

Paolo Avner

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

Vincent Viguie

CIRED, International Research Center on Environment & Development, France ( email )

Campus du Jardin Tropical
45 bis avenue de la Belle Gabrielle
F94736 Nogent sur Marne Cedex
France

Harris Selod

National Institute for Agricultural Research (INRA) ( email )

147, rue de l'Universite
Paris Cedex 07, 78-Yvelines 75338
France
+33 1 4313 6365 (Phone)
+33 1 4313 6362 (Fax)

National Institute of Statistics and Economic Studies (INSEE) - Center for Research in Economics and Statistics (CREST)

15 Boulevard Gabriel Peri
Malakoff Cedex, 1 92245
France

The World Bank ( email )

1818 H Street, N.W.
Washington, DC 20433
United States

Paris School of Economics (PSE) ( email )

48 Boulevard Jourdan
Paris, 75014 75014
France

World Bank - Development Research Group (DECRG)

1818 H. Street, N.W.
MSN3-311
Washington, DC 20433
United States

Stephane Hallegatte

World Bank ( email )

1818 H Street NW
Washington, DC 20433
United States

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