Who Pays a Price on Carbon?

Corbett Grainger, Charles D. Kolstad

Environmental and Resource Economics · 2010 · 248 citations · 28 references

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TL;DR

The study aims to quantify how a carbon tax burdens different income deciles and industries, and to explore policy measures that could mitigate its regressive effects. Using the 2003 Consumer Expenditure Survey and a 1997 input‑output emissions model, the authors estimate the carbon‑price incidence under a cap‑and‑trade or tax scheme in the United States. Results show that a carbon tax is regressive, driven mainly by energy‑intensive consumption patterns, and that per‑capita costs are even more unequal than household‑level estimates.

Abstract

We use the 2003 Consumer Expenditure Survey and emissions estimates from an input-output model based on the 1997 US economy to estimate the incidence of a price on carbon induced by a cap-and-trade program or carbon tax in the context of the US. We present results on how much different income deciles pay for a carbon tax as well as which industries see the largest increase in costs due to a carbon tax. We illustrate the main determinant of the regressivity: consumption patterns for energy-intensive goods. Furthermore, on a per-capita basis a carbon price is much more regressive than calculations at the household level. We discuss policy options to offset the adverse distributional effects of a carbon emissions policy.

References

28