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 School of Public Health
Francis Dennig: Yale-NUS College
Frank Errickson: UC Berkeley - University of California [Berkeley] - UC - University of California, Princeton University
Simon Feindt: MCC - Mercator Research Institute on Global Commons and Climate Change - PIK - Potsdam Institute for Climate Impact Research, TUB - Technical University of Berlin / Technische Universität Berlin
Maddalena Ferranna: Harvard School of Public Health - Department of Global Health and Population [Boston, MA, USA] - Harvard University
Ulrike Kornek: MCC - Mercator Research Institute on Global Commons and Climate Change - PIK - Potsdam Institute for Climate Impact Research, PIK - Potsdam Institute for Climate Impact Research
Kevin Kuruc: OU - University of Oklahoma
Wei Peng: Penn State - Pennsylvania State University - Penn State System
Noah Scovronick: Emory University [Atlanta, GA]
Dean Spears: University of Texas at Austin [Austin]
Fabian Wagner: IIASA - International Institute for Applied Systems Analysis [Laxenburg]

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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
New Economics Papers: this item is included in nep-ene, nep-env and nep-res
Note: View the original document on HAL open archive server: https://hal.science/hal-03483584v1
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Published in Nature Climate Change, 2021, 11 (12), pp.1111-1116. ⟨10.1038/s41558-021-01217-0⟩

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Journal Article: 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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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-03483584

DOI: 10.1038/s41558-021-01217-0

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