DESIGNING CLIMATE-CHANGE LEGISLATION THAT SHIELDS LOW- INCOME HOUSEHOLDS FROM INCREASED POVERTY AND HARDSHIP

Abstract

Efficient, effective policies to reduce greenhouse-gas emissions work in part by raising the prices of fossil-fuel energy products to encourage energy efficiency and the substitution of clean energy sources for fossil fuel. This is essential to prevent extensive environmental and economic damage from climate change. However, it will raise costs to consumers for a wide array of products and services, from gasoline and electricity to food, mass transit, and other products or services with significant energy inputs. The cost increases will pose special challenges for low- and moderate-income households because, as Congressional Budget Office studies have shown, they spend a larger share of their budgets on energy than better-off households do. Using methodology developed by CBO and data from the Bureau of Labor Statistics’ Consumer Expenditure Agency, we estimate that households in the poorest fifth of the population would, on average, face an estimated $750 to $950