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Distributional Impacts of Carbon Pricing Policies under Paris Agreement: Inter and Intra-Regional Perspectives

Author

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  • Chepeliev, Maksym
  • Israel Osorio Rodarte
  • Dominique van der Mensbrugghe
Abstract
While bringing multiple benefits for the environment, achievement of the stringent global greenhouse gas emissions reduction target, like the one outlined in the Paris Climate Agreement, is associated with significant implementation costs and could impact different dimensions of human well-being, including welfare, poverty and distributional aspects. In this paper, we analyze the poverty and distributional impacts of different carbon pricing mechanisms consistent with reaching the Paris Agreement targets. We link a global recursive dynamic computable general equilibrium model ENVISAGE with the GIDD microsimulation model and explore three levels of mitigation effort and five carbon pricing options (trade coalitions). Results suggest that while there is a higher incidence of poverty in all scenarios, mainly driven by lower economic growth, Nationally Determined Contribution (NDC) policies result in progressive income distribution at the global level. Such progressivity is caused not only by lower relative prices of food versus non-food commodities, but also by a general decline in skill wage premia.

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  • Chepeliev, Maksym & Israel Osorio Rodarte & Dominique van der Mensbrugghe, 2021. "Distributional Impacts of Carbon Pricing Policies under Paris Agreement: Inter and Intra-Regional Perspectives," GTAP Working Papers 6194, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University.
    • Handle: RePEc:gta:workpp:6194
    Note: GTAP Working Paper No. 88
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    Cited by:

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    2. Maksym Chepeliev & Thomas Hertel & Dominique van der Mensbrugghe, 2022. "Cutting Russia's fossil fuel exports: Short‐term economic pain for long‐term environmental gain," The World Economy, Wiley Blackwell, vol. 45(11), pages 3314-3343, November.
    3. Kettner, Claudia & Leoni, Thomas & Köberl, Judith & Kortschak, Dominik & Kirchner, Mathias & Sommer, Mark & Wallenko, Laura & Bachner, Gabriel & Mayer, Jakob & Spittler, Nathalie & Kulmer, Veronika, 2024. "Modelling the economy-wide effects of unilateral CO2 pricing under different revenue recycling schemes in Austria – Searching for a triple dividend," Energy Economics, Elsevier, vol. 137(C).
    4. Chepeliev,Maksym & Maliszewska,Maryla & Osorio-Rodarte,Israel & Seara E Pereira,Maria Filipa & Van Der Mensbrugghe,Dominique, 2022. "Pandemic Climate Mitigation, and Reshoring : Impacts of a Changing Global Economy on Trade, Incomes,and Poverty," Policy Research Working Paper Series 9955, The World Bank.
    5. Hübler, Michael & Wiese, Malin & Braun, Marius & Damster, Johannes, 2024. "The distributional effects of CO2 pricing at home and at the border on German income groups," Resource and Energy Economics, Elsevier, vol. 77(C).
    6. Chepeliev, Maksym & Thomas Hertel & Dominique van der Mensbrugghe, 2022. "Cutting Russia’s Fossil Fuel Exports: Short-Term Pain for Long-Term Gain," GTAP Working Papers 6511, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University.
    7. Tol, Richard S.J., 2023. "The fiscal implications of stringent climate policy," Economic Analysis and Policy, Elsevier, vol. 80(C), pages 495-504.
    8. Richard S. J. Tol, 2023. "Navigating the energy trilemma during geopolitical and environmental crises," Papers 2301.07671, arXiv.org.
    9. Dinh Hoa Nguyen & Andrew Chapman & Takeshi Tsuji, 2023. "Assessing the Optimal Contributions of Renewables and Carbon Capture and Storage toward Carbon Neutrality by 2050," Sustainability, MDPI, vol. 15(18), pages 1-22, September.
    10. Dogan, Berna & Tekgüç, Hasan & Yeldan, A. Erinç, 2022. "Towards A Green Income Support Policy: Investigating Social and Fiscal Alternatives for Turkey," Conference papers 333496, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    11. Maksym Chepeliev, 2023. "GTAP-Power Data Base: Version 11," Journal of Global Economic Analysis, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University, vol. 8(2), pages 100-133, December.
    12. Han Wang & Yujie Jin & Xingming Hong & Fuan Tian & Jianxian Wu & Xin Nie, 2022. "Integrating IPAT and CLUMondo Models to Assess the Impact of Carbon Peak on Land Use," Land, MDPI, vol. 11(4), pages 1-16, April.
    13. Kitetu, Geoffrey M. & Ko, Jong-Hwan, 2022. "United States Re-enters the 2015 Paris Climate Agreement: The Unexpected Twists and the Opportunity Costs? A CGE Approach," Conference papers 333503, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    14. Leimbach, Marian & Hübler, Michael & Mahlkow, Hendrik & Montrone, Lorenzo & Bukin, Eduard & Felbermayr, Gabriel & Kalkuhl, Matthias & Koch, Johannes & Marcolino, Marcos & Pothen, Frank & Steckel, Jan , 2024. "Macroeconomic structural change likely increases inequality in India more than climate policy," Open Access Publications from Kiel Institute for the World Economy 302045, Kiel Institute for the World Economy (IfW Kiel).
    15. Okorie, David Iheke & Wesseh, Presley K., 2023. "Climate agreements and carbon intensity: Towards increased production efficiency and technical progress?," Structural Change and Economic Dynamics, Elsevier, vol. 66(C), pages 300-313.
    16. Jia, Zhijie & Wen, Shiyan & Liu, Yu, 2022. "China's urban-rural inequality caused by carbon neutrality: A perspective from carbon footprint and decomposed social welfare," Energy Economics, Elsevier, vol. 113(C).

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    JEL classification:

    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • C83 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Survey Methods; Sampling Methods
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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