Emission distribution and incidence of national mitigation policies among households in Austria

One major barrier for the feasibility of national climate policies is limited public acceptance because of distributional concerns. In the literature, different approaches are used to investigate the incidence of climate policies across income groups. We consistently apply three approaches of incidence analysis to the case of Austria, that vary in terms of granularity of household aggregates, scope of covered effects as well as data and computational intensity: (i) a micro study of household expenditure, (ii) a combined Input-Output micro study (e.g. of carbon footprints) and (iii) macroeconomic computable general equilibrium (CGE) modelling with heterogeneous household groups. While most analyses so far study carbon pricing or fuel taxes, we compare the usefulness of incidence approaches for three different policy instruments of a fuel tax increase, a change in building code regulation and company mobility plans. Micro studies and combined Input-Output analysis, allow for considering richer socioeconomic detail on the household level than CGE models. We find them useful to show that variations of emissions within income groups, identified for horizontal equity concerns, are much less relevant when considering embodied emissions in consumption instead of household direct emissions from fuel use only. However, we find that the incidence of climate policies in general is determined by four aspects that are fully covered only by CGE modelling: (i) the consumption patterns of households (income use) and (ii) the corresponding emission intensities of consumption, (iii) the existing distribution and composition of income (income source), and (iv) the specific policy and policy design considered. Using CGE analysis, we show that the three investigated policies lead to very different incidence effects induced by the dominance and interplay of income use and source side effects.