Economics at your fingertips  

Poverty and distributional effects of carbon pricing in low- and middle-income countries – A global comparative analysis

Ira Irina Dorband, Michael Jakob (), Matthias Kalkuhl and Jan Steckel ()

World Development, 2019, vol. 115, issue C, 246-257

Abstract: Even though concerns about adverse distributional implications for the poor are one of the most important political challenges for carbon pricing, the existing literature reveals ambiguous results. For this reason, we assess the expected incidence of moderate carbon price increases for different income groups in 87 mostly low- and middle-income countries. Building on a consistent dataset and method, we find that for countries with per capita incomes of below USD 15,000 per year (at PPP-adjusted 2011 USD) carbon pricing has, on average, progressive distributional effects. We also develop a novel decomposition technique to show that distributional outcomes are primarily determined by differences among income groups in consumption patterns of energy, rather than of food, goods or services. We argue that an inverse U-shape relationship between energy expenditure shares and income explains why carbon pricing tends to be regressive in countries with relatively higher income. Since these countries are likely to have more financial resources and institutional capacities to deal with distributional issues, our findings suggest that mitigating climate change, raising domestic revenue and reducing economic inequality are not mutually exclusive, even in low- and middle-income countries.

Keywords: Carbon pricing; Distributional effect; Decomposition analysis; Global comparison; Household data; Low- and middle-income countries (search for similar items in EconPapers)
JEL-codes: Q52 Q54 D57 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6) Track citations by RSS feed

Downloads: (external link)
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

DOI: 10.1016/j.worlddev.2018.11.015

Access Statistics for this article

World Development is currently edited by O. T. Coomes

More articles in World Development from Elsevier
Bibliographic data for series maintained by Haili He ().

Page updated 2020-11-05
Handle: RePEc:eee:wdevel:v:115:y:2019:i:c:p:246-257