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Six Distributional Effects of Environmental Policy

  • Don Fullerton

While prior literature has identified various effects of environmental policy, this note uses the example of a proposed carbon permit system to illustrate and discuss six different types of distributional effects: (1) higher prices of carbon-intensive products, (2) changes in relative returns to factors like labor, capital, and resources, (3) allocation of scarcity rents from a restricted number of permits, (4) distribution of the benefits from improvements in environmental quality, (5) temporary effects during the transition, and (6) capitalization of all those effects into prices of land, corporate stock, or house values. The note also discusses whether all six effects could be regressive, that is, whether carbon policy could place disproportionate burden on the poor.

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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 3299.

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Date of creation: 2010
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Handle: RePEc:ces:ceswps:_3299
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  1. Olivier Deschênes & Michael Greenstone, 2007. "Climate Change, Mortality, and Adaptation: Evidence from Annual Fluctuations in Weather in the US," NBER Working Papers 13178, National Bureau of Economic Research, Inc.
  2. Olivier Deschênes, 2011. "Climate Policy and Labor Markets," NBER Chapters, in: The Design and Implementation of U.S. Climate Policy, pages 37-49 National Bureau of Economic Research, Inc.
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