Distributional impacts of carbon pricing in developing Asia

Jan Steckel, Ira I. Dorband, Lorenzo Montrone, Hauke Ward, Leonard Missbach, Fabian Hafner, Michael Jakob and Sebastian Renner
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Ira I. Dorband: Mercator Research Institute on Global Commons and Climate Change
Lorenzo Montrone: Mercator Research Institute on Global Commons and Climate Change
Hauke Ward: Mercator Research Institute on Global Commons and Climate Change
Leonard Missbach: Mercator Research Institute on Global Commons and Climate Change
Fabian Hafner: Mercator Research Institute on Global Commons and Climate Change
Michael Jakob: Mercator Research Institute on Global Commons and Climate Change
Sebastian Renner: Mercator Research Institute on Global Commons and Climate Change

Nature Sustainability, 2021, vol. 4, issue 11, 1005-1014

Abstract: Abstract Understanding who would be affected in which way by carbon pricing is pivotal for effective and socially equitable policy design, addressing climate change and reducing inequality. This paper focuses on eight key countries in developing Asia (Bangladesh, India, Indonesia, Pakistan, Philippines, Thailand, Turkey and Vietnam). By combining national household surveys with input–output data, we compare the distributional effects of four carbon pricing design options, including a globally harmonized carbon price, a national carbon price and sectoral carbon prices in the power and transport sectors, respectively. Our analysis reveals a substantial degree of variation regarding who would be affected across policy designs and countries. Looking into national carbon pricing as the most favourable policy option from an economic point of view, we find that differences in distributional outcomes are generally more pronounced within income groups than across income groups. These differences are mainly driven by households’ energy use patterns, which vary across countries. Equally recycling revenues back to all citizens would overcompensate the burden of a carbon price for the poorest households in all countries.

Date: 2021
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DOI: 10.1038/s41893-021-00758-8

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