Vertical and Horizontal Redistributions from a Carbon Tax and Rebate

Abstract

Weisbach, and participants at two NBER workshops for helpful comments and suggestions. Views contained herein are the authors and do not necessarily reflect the views or positions of the U.S. Department of the Treasury. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research. NBER working papers are circulated for discussion and comment purposes. They have not been peer-reviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.

Carbon Pricing in the US: Examining State-Level Policy Support and Federal Resistance

“…Several environmental justice groups oppose a federal carbon price because they object to the notion that polluters can pay a tax and continue to pollute near low-income minority communities, sometimes referred to as "sacrifice-zones," which already bear the burden of fossil fuel infrastructure (National Association for the Advancement of Colored People, 2021). Environmental advocates also worry that depending on how the policy is implemented, a carbon price can be regressive, disproportionately hurting low-income people (Cronin et al, 2019). At the dawn of the Biden administration, the politics of carbon pricing underwent yet another shift.…”

Ten new insights in climate science 2021: a horizon scan

“…Without careful design (see, e.g. Cronin et al, 2019), regressive pricing can produce further backlash or opposition from lower-income groups. The redistribution of revenues can make carbon pricing more politically acceptable to the public at large (Jagers et al, 2021).…”

Managing the distributional effects of environmental and climate policies

“…In turn, wage losses are more frequently reported. For profits, Marin et al (2018[29]) find a small increase in mark-ups for European firms treated under the EU-ETS compared to a suitable counterfactual and other papers document a positive relationship between allowance prices and profits for the EU-ETS (e.g., Bushnell, Chong and Mansur, 2013[40]; Hintermann, Peterson and Rickels, 2016 [41]). 10 For average wages, Walker (2013 [30]) finds negative and modestly large effects for the US Clean Air Act using matched employeremployee data.…”

“…Taken together with evidence presented in Section 2.2, this implies that some of the workers displaced by energy taxes and climate policies can be re-employed in the green economy with a limited cost in terms of retraining. 41 However, to the extent to which job destroyed and created are not located in the same region, reallocation costs related to the need to move workers can be large and should be properly considered in an fully-fledged analysis of costs and benefits. Note: ++ very progressive, + progressive, = neutral, -regressive, --very regressive, ?…”

“…Source: Authors. 41 However, the wage of manual workers stagnates also in areas receiving more green ARRA spending, but this result requires further scrutiny using panel data to control for self-selection into manual occupations.…”