The Incidence of U.S. Climate Policy: Alternative Uses of Revenues from a Cap-and-Trade Auction

Dallas Burtraw, Richard Sweeney and Margaret Walls

RFF Working Paper Series from Resources for the Future

Abstract: This paper evaluates the costs to households of a carbon dioxide (CO2) cap-and-trade program. We find important variation in the distribution of costs of the policy across 11 regions of the country and income deciles. The introduction of a price on CO2 is regressive, but this may be outweighed by the distribution value of CO2 emissions allowances. We evaluate five alternatives: three are progressive (expansion of the Earned Income Tax Credit and cap-and-dividend approaches), while the others are neutral (reduction in payroll tax) or amplify the regressivity (reduction in income tax). Regional differences are most substantial for low-income households.

Keywords: cap-and-trade; allocation; distributional effects; cost burden; equity (search for similar items in EconPapers)
JEL-codes: H22 H23 Q52 Q54 (search for similar items in EconPapers)
Date: 2009-04-09
New Economics Papers: this item is included in nep-ene and nep-env
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Citations: View citations in EconPapers (68)

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Journal Article: The Incidence of U.S. Climate Policy: Alternative Uses of Revenues From a Cap-and-Trade Auction (2009)
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