The Incidence of Pollution Control Policies

44 Pages Posted: 12 Jul 2005 Last revised: 4 Oct 2014

See all articles by Ian W. H. Parry

Ian W. H. Parry

Resources for the Future

Hilary Sigman

Rutgers University - Department of Economics; National Bureau of Economic Research (NBER)

Margaret Walls

Resources for the Future - Quality of the Environment Division

Roberton C. Williams

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

Date Written: June 2005

Abstract

This paper reviews theoretical and empirical literature on the household distribution of the costs and benefits of pollution control policies, and ways of integrating distributional issues into environmental cost/benefit analysis. Most studies find that policy costs fall disproportionately on poorer groups, though this is less pronounced when lifetime income is used, and policies affect prices of inputs used pervasively across the economy. The policy instrument itself is also critical; freely allocated emission permits may hurt the poor the most, as they transfer income to shareholders via scarcity rents created by higher prices, while emissions taxes offer opportunities for progressive revenue recycling. And although low-income households appear to bear a disproportionate share of environmental risks, policies that reduce risks are not always progressive, for example, they may alter property values in ways that benefit the wealthy. The review concludes by noting a number of areas where future research is badly needed.

Suggested Citation

Parry, Ian W. H. and Sigman, Hilary A. and Walls, Margaret and Williams, Roberton C., The Incidence of Pollution Control Policies (June 2005). NBER Working Paper No. w11438. Available at SSRN: https://ssrn.com/abstract=752016

Ian W. H. Parry

Resources for the Future ( email )

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HOME PAGE: http://www.rff.org/~parry

Hilary A. Sigman (Contact Author)

Rutgers University - Department of Economics ( email )

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HOME PAGE: http://econweb.rutgers.edu/sigman

National Bureau of Economic Research (NBER)

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Margaret Walls

Resources for the Future - Quality of the Environment Division ( email )

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United States

Roberton C. Williams

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

Symmons Hall, Rm 2200
University of Maryland
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United States

National Bureau of Economic Research (NBER) ( email )

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HOME PAGE: http://www.nber.org/cgi-bin/familyinfo.pl?a=a&user=roberton_williams

Resources for the Future ( email )

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Washington, DC 20036
United States

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