Distributional Impacts of Carbon Pricing: A General Equilibrium Approach with Micro-Data for Households

Sebastian Rausch, Gilbert Metcalf and John Reilly

No 17087, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Many policies to limit greenhouse gas emissions have at their core efforts to put a price on carbon emissions. Carbon pricing impacts households both by raising the cost of carbon intensive products and by changing factor prices. A complete analysis requires taking both effects into account. The impact of carbon pricing is determined by heterogeneity in household spending patterns across income groups as well as heterogeneity in factor income patterns across income groups. It is also affected by precise formulation of the policy (how is the revenue from carbon pricing distributed) as well as the treatment of other government policies (e.g. the treatment of transfer payments). What is often neglected in analyses of policy is the heterogeneity of impacts across households even within income or regional groups. In this paper, we incorporate 15,588 households from the U.S. Consumer and Expenditure Survey data as individual agents in a comparative-static general equilibrium framework. These households are represented within the MIT USREP model, a detailed general equilibrium model of the U.S. economy. In particular, we categorize households by full household income (factor income as well as transfer income) and apply various measures of lifetime income to distinguish households that are temporarily low-income (e.g., retired households drawing down their financial assets) from permanently low-income households. We also provide detailed within-group distributional measures of burden impacts from various policy scenarios.

JEL-codes: H22 Q54 Q58 (search for similar items in EconPapers)
Date: 2011-05
New Economics Papers: this item is included in nep-agr, nep-ene, nep-env and nep-res
Note: EEE PE
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Citations: View citations in EconPapers (224)

Published as Rausch, Sebastian & Metcalf, Gilbert E. & Reilly, John M., 2011. "Distributional impacts of carbon pricing: A general equilibrium approach with micro-data for households," Energy Economics, Elsevier, vol. 33(S1), pages S20-S33.

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Journal Article: Distributional impacts of carbon pricing: A general equilibrium approach with micro-data for households (2011)
Working Paper: Distributional Impacts of Carbon Pricing: A General Equilibrium Approach with Micro-Data for Households (2011)
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