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Distributional Impacts in a Comprehensive Climate Policy Package

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  • Gilbert E. Metcalf
  • Aparna Mathur
  • Kevin A. Hassett

Abstract

This paper provides a simple analytic approach for measuring the burden of carbon pricing that does not require sophisticated and numerically intensive economic models but which is not limited to restrictive assumptions of forward shifting of carbon prices. We also show how to adjust for the capital income bias contained in the Consumer Expenditure Survey, a bias towards regressivity in carbon pricing due to underreporting of capital income in higher income deciles in the Survey. Many distributional analyses of carbon pricing focus on the uses-side incidence of carbon pricing. This is the differential burden resulting from heterogeneity in consumption across households. Once one allows for sources-side incidence (i.e. differential impacts of changes in real factor prices), carbon policies look more progressive. Perhaps more important than the findings from any one scenario, our results on the progressivity of the leading cap and trade proposals are robust to the assumptions made on the relative importance of uses and sources side heterogeneity.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 16101.

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Date of creation: Jun 2010
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Publication status: published as Distributional Impacts in a Comprehensive Climate Policy Package , Gilbert E. Metcalf, Aparna Mathur, Kevin A. Hassett. in The Design and Implementation of U.S. Climate Policy , Fullerton and Wolfram. 2012
Handle: RePEc:nbr:nberwo:16101

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  1. Kevin A. Hassett & Aparna Mathur & Gilbert E. Metcalf, 2007. "The Incidence of a U.S. Carbon Tax: A Lifetime and Regional Analysis," NBER Working Papers 13554, National Bureau of Economic Research, Inc.
  2. Andrew B. Lyon & Robert M. Schwab, 1991. "Consumption Taxes in a Life-Cycle Framework: Are Sin Taxes Regressive?," NBER Working Papers 3932, National Bureau of Economic Research, Inc.
  3. Don Fullerton & Garth Heutel, 2010. "Analytical General Equilibrium Effects of Energy Policy on Output and Factor Prices," NBER Working Papers 15788, National Bureau of Economic Research, Inc.
  4. Sebastian Rausch & Gilbert E. Metcalf & John M. Reilly & Sergey Paltsev, 2010. "Distributional Implications of Alternative U.S. Greenhouse Gas Control Measures," Discussion Papers Series, Department of Economics, Tufts University, Department of Economics, Tufts University 0753, Department of Economics, Tufts University.
  5. Parry, Ian, 2003. "Are Emissions Permits Regressive?," Discussion Papers, Resources For the Future dp-03-21, Resources For the Future.
  6. Nicholas Bull & Kevin A. Hassett & Gilbert E. Metcalf, 1993. "Who pays broad-based energy taxes? Computing lifetime and regional incidence," Working Paper Series / Economic Activity Section, Board of Governors of the Federal Reserve System (U.S.) 142, Board of Governors of the Federal Reserve System (U.S.).
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Cited by:
  1. Garth Heutel, 2011. "Online Appendix to "How Should Environmental Policy Respond to Business Cycles? Optimal Policy under Persistent Productivity Shocks"," Technical Appendices, Review of Economic Dynamics 10-62, Review of Economic Dynamics.
  2. Gary D. Libecap, 2014. "Addressing Global Environmental Externalities: Transaction Costs Considerations," Journal of Economic Literature, American Economic Association, American Economic Association, vol. 52(2), pages 424-79, June.
  3. Dissou, Yazid & Siddiqui, Muhammad Shahid, 2014. "Can carbon taxes be progressive?," Energy Economics, Elsevier, Elsevier, vol. 42(C), pages 88-100.
  4. Heutel, Garth, 2011. "How Should Environmental Policy Respond to Business Cycles? Optimal Policy under Persistent Productivity Shocks," Working Papers 11-8, University of North Carolina at Greensboro, Department of Economics.
  5. Katri Kosonen, 2012. "Regressivity of environmental taxation: myth or reality?," Taxation Papers, Directorate General Taxation and Customs Union, European Commission 32, Directorate General Taxation and Customs Union, European Commission.
  6. Gary D. Libecap, 2013. "Addressing Global Environmental Externalities: Transaction Costs Considerations," NBER Working Papers 19501, National Bureau of Economic Research, Inc.
  7. Xaquín Garcia-Muros & Mercedes Burguillo & Mikel Gonzalez-Eguino & Desiderio Romero-Jordán, 2014. "Local air pollution and global climate change taxes: a distributional analysis," Working Papers, BC3 2014-01, BC3.

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