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Climate Change Mitigation Policies: Aggregate and Distributional Effects

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  • Cavalcanti, T.
  • Hasna, Z.
  • Santos, C.

Abstract

We evaluate the aggregate and distributional effects of climate change mitigation policies using a multi-sector equilibrium model with intersectoral input–output linkages and worker heterogeneity calibrated to different countries. The introduction of carbon taxes leads to changes in relative prices and inputs reallocation, including labor. For the United States, reaching its original Paris Agreement pledge would imply at most a 0.6% drop in output. This impact is distributed asymmetrically across sectors and individuals. In the US, workers with a comparative advantage in dirty energy sectors who do not reallocate suffer a welfare loss 12 times higher than workers in non-dirty sectors, but constitute less than 1% of the labor force.

Suggested Citation

  • Cavalcanti, T. & Hasna, Z. & Santos, C., 2021. "Climate Change Mitigation Policies: Aggregate and Distributional Effects," Cambridge Working Papers in Economics 2122, Faculty of Economics, University of Cambridge.
    • Handle: RePEc:cam:camdae:2122
    Note: tvdvc2, zh274
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    Cited by:

    1. Mireille Chiroleu-Assouline, 2022. "Rendre acceptable la nécessaire taxation du carbone. Quelles pistes pour la France ?," Revue de l'OFCE, Presses de Sciences-Po, vol. 0(1), pages 15-53.
    2. Nuno Lourenço & Zeina Hasna & Cezar Santos, 2022. "On the aggregate and distributional effects of carbon taxation in Portugal," Economic Bulletin and Financial Stability Report Articles and Banco de Portugal Economic Studies, Banco de Portugal, Economics and Research Department.
    3. Fernandes, Bernardo de Barros & Ferreira, Pedro Cavalcanti, 2023. "Network and general equilibrium effects of carbon taxes and deforestation," FGV EPGE Economics Working Papers (Ensaios Economicos da EPGE) 833, EPGE Brazilian School of Economics and Finance - FGV EPGE (Brazil).

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    More about this item

    Keywords

    Climate change; carbon taxes; worker heterogeneity; labor reallocation;
    All these keywords.

    JEL classification:

    • E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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