Climate action with revenue recycling has benefits for poverty, inequality and well-being

Mark Budolfson (), Francis Dennig, Frank Errickson, Simon Feindt, Maddalena Ferranna, Marc Fleurbaey, David Klenert, Ulrike Kornek, Kevin Kuruc, Aurélie Méjean, Wei Peng, Noah Scovronick, Dean Spears, Fabian Wagner and Stéphane Zuber
Additional contact information
Mark Budolfson: Rutgers University
Francis Dennig: Yale-NUS College
Frank Errickson: University of California
Simon Feindt: Mercator Research Institute on Global Commons and Climate Change (MCC)
Maddalena Ferranna: Harvard University
Ulrike Kornek: Mercator Research Institute on Global Commons and Climate Change (MCC)
Kevin Kuruc: University of Oklahoma
Wei Peng: Pennsylvania State University
Noah Scovronick: Emory University
Dean Spears: University of Texas
Fabian Wagner: International Institute for Applied Systems Analysis (IIASA)

Nature Climate Change, 2021, vol. 11, issue 12, 1111-1116

Abstract: Abstract Existing estimates of optimal climate policy ignore the possibility that carbon tax revenues could be used in a progressive way; model results therefore typically imply that near-term climate action comes at some cost to the poor. Using the Nested Inequalities Climate Economy (NICE) model, we show that an equal per capita refund of carbon tax revenues implies that achieving a 2 °C target can pay large and immediate dividends for improving well-being, reducing inequality and alleviating poverty. In an optimal policy calculation that weighs the benefits against the costs of mitigation, the recommended policy is characterized by aggressive near-term climate action followed by a slower climb towards full decarbonization; this pattern—which is driven by a carbon revenue Laffer curve—prevents runaway warming while also preserving tax revenues for redistribution. Accounting for these dynamics corrects a long-standing bias against strong immediate climate action in the optimal policy literature.

Date: 2021
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Working Paper: Climate action with revenue recycling has benefits for poverty, inequality and well-being (2021)
Working Paper: Climate action with revenue recycling has benefits for poverty, inequality and well-being (2021)
Working Paper: Climate action with revenue recycling has benefits for poverty, inequality and well-being (2021)
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DOI: 10.1038/s41558-021-01217-0

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