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The Incidence of Pollution Control Policies

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  • Parry, Ian

    ()
    (Resources for the Future)

  • Walls, Margaret

    ()
    (Resources for the Future)

  • Sigman, Hilary
  • Williams III, Roberton

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.

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Paper provided by Resources For the Future in its series Discussion Papers with number dp-05-24.

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Date of creation: 01 Jun 2005
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Handle: RePEc:rff:dpaper:dp-05-24

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Keywords: distributional incidence; emissions taxes; tradable permits; environmental benefits; distributional weights;

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