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SUMMARY:Who pays for higher carbon prices in OECD countries? Monitoring households' adjustment burdens
DESCRIPTION:Climate change and climate-change mitigation both have potentially major distributional effects. The distribution of the costs of climate-change mitigation\, in turn\, is among the main drivers of voter support for necessary policy action (Dechezleprêtre\, et al.\, 2022). Carbon pricing aims to narrow the gaps between private and social costs of greenhouse gas emissions and is frequently seen as one of the main policy tools for turning national and international net-zero commitments into reality. It can be controversial however\, including in the context of recent cost-of-living increases. Its implementation remains uneven globally and across the OECD\, and the distributional effects of carbon pricing\, and their drivers\, are currently not widely understood. This paper compares the carbon intensities of households’ consumption baskets in selected countries and assesses how higher carbon prices alter household budgets and consumption patterns. Tracing emissions and the resulting carbon prices through the value chain requires combining and aligning data from disparate sources. The paper utilises information on the carbon intensity of different fuels\, Input-Output information across industries and sectors\, budget surveys to link carbon footprints to specific households\, as well as granular policy information on different types of carbon pricing that countries have actually introduced (OECD\, 2016\, 2023). Results shed light on whether carbon pricing measures are regressive and they compare carbon-price burdens across countries and groups\, including those that can be of particular policy interest\, such as older or rural populations. The objective is two-fold: (1) to inform policy decisions about feasible reform paths\, including suitable strategies for providing compensation to households; and (2) to distil relevant drivers of distributional outcomes\, such as the type of carbon-pricing measure\, patterns of households’ fuel consumption\, the carbon-intensity of different goods and services\, or behavioural reactions to price changes.
URL:https://test.whatworksclimate.solutions/presentation/who-pays-for-higher-carbon-prices-in-oecd-countries-monitoring-households-adjustment-burdens/
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