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The Incidence of Pollution Control Policies

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Author Info
Parry, Ian () (Resources for the Future)
Walls, Margaret () (Resources for the Future)
Sigman, Hilary
Williams III, Roberton

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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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Related research
Keywords: distributional incidence emissions taxes tradable permits environmental benefits distributional weights

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Find related papers by JEL classification:
Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Costs; Distributional Effects; Employment Effects
Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy
H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence

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Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Matthew Riddle & James Boyce, 2007. "Cap and Dividend: How to Curb Global Warming while Protecting the Incomes of American Families," Working Papers wp150, Political Economy Research Institute, University of Massachusetts at Amherst. [Downloadable!]
  2. Abdelkrim Araar & Yazid Dissou & Jean-Yves Duclos, 2008. "Household Incidence of Pollution Control Policies: a Robust Welfare Analysis Using General Equilibrium Effects," Cahiers de recherche 0809, CIRPEE. [Downloadable!]
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