The social cost of carbon and inequality: When local redistribution shapes global carbon prices

Ulrike Kornek, David Klenert, Ottmar Edenhofer and Marc Fleurbaey
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Ulrike Kornek: CAU - Christian-Albrechts-Universität zu Kiel = Christian-Albrechts University of Kiel = Université Christian-Albrechts de Kiel

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Abstract: The social cost of carbon is a central metric for optimal carbon prices. Previous literature shows that inequality significantly influences the social cost of carbon, but mostly omits het-erogeneity below the national level. We present an optimal taxation model of the social cost of carbon that accounts for inequality between and within countries. We find that climate and distributional policy can generally not be separated. If only one country does not compen-sate low-income households for disproportionate damages, the social cost of carbon tends to increase globally. Optimal carbon prices remain roughly unchanged if national redistribu-tion leaves inequality between households unaffected by climate change and if the utility of households is approximately logarithmic in consumption.

Keywords: Optimal taxation; Inequality; Climate change; Social cost of carbon; Carbon tax (search for similar items in EconPapers)
Date: 2021-05
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Citations: View citations in EconPapers (7)

Published in Journal of Environmental Economics and Management, 2021, 107, ⟨10.1016/j.jeem.2021.102450⟩

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Related works:
Journal Article: The social cost of carbon and inequality: When local redistribution shapes global carbon prices (2021)
Working Paper: The social cost of carbon and inequality: When local redistribution shapes global carbon prices (2021)
Working Paper: The social cost of carbon and inequality: when local redistribution shapes global carbon prices (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-03426147

DOI: 10.1016/j.jeem.2021.102450

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