Within-country inequality and the shaping of a just global climate policy

Marie Young-Brun, Francis Dennig, Frank Errickson, Simon Feindt, Aurélie Méjean () and Stéphane Zuber ()
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Marie Young-Brun: CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique
Francis Dennig: WBG = GBM - World Bank Group = Groupe Banque Mondiale
Frank Errickson: Princeton University
Simon Feindt: PIK - Potsdam Institute for Climate Impact Research
Aurélie Méjean: CIRED - Centre International de Recherche sur l'Environnement et le Développement - Cirad - Centre de Coopération Internationale en Recherche Agronomique pour le Développement - EHESS - École des hautes études en sciences sociales - AgroParisTech - Université Paris-Saclay - CNRS - Centre National de la Recherche Scientifique - ENPC - École nationale des ponts et chaussées - IP Paris - Institut Polytechnique de Paris
Stéphane Zuber: CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique

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Abstract: Climate policy design must balance emissions mitigation with concerns for fairness, particularly as climate change disproportionately affects the poorest households within and across countries. Integrated Assessment Models used for global climate policy evaluation have so far typically not considered inequality effects within countries. To fill this gap, we develop a global Integrated Assessment Model representing national economies and subnational income, mitigation cost, and climate damage distribution and assess a range of climate policy schemes with varying levels of effort sharing across countries and households. The schemes are consistent with limiting temperature increases to 2 °C and account for the possibility to use carbon tax revenues to address distributional effects within and between countries. We find that carbon taxation with redistribution improves global welfare and reduces inequality, with the most substantial gains achieved under uniform taxation paired with global per capita transfers. A Loss and Damage mechanism offers significant welfare improvements in vulnerable countries while requiring only a modest share of global carbon revenues in the medium term. The poorest households within all countries may benefit from the transfer scheme, in particular when some redistribution is made at the country level. Our findings underscore the potential for climate policy to advance both environmental and social goals, provided revenue recycling mechanisms are effectively implemented. In particular, they demonstrate the feasibility of a welfare improving global climate policy involving limited international redistribution.

Keywords: FairCarboN; Loss and Damage; Inequality; global climate policy (search for similar items in EconPapers)
Date: 2025
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-05289246v1
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Published in Proceedings of the National Academy of Sciences of the United States of America, 2025, 122 (39), ⟨10.1073/pnas.2505239122⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:halshs-05289246

DOI: 10.1073/pnas.2505239122

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