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Distributional effects of emission pricing in a carbon-intensive economy: The case of Poland

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  • Antosiewicz, Marek
  • Fuentes, J. Rodrigo
  • Lewandowski, Piotr
  • Witajewski-Baltvilks, Jan
Abstract
We assess the distributional impact of introducing a carbon tax in a small open economy, using the case of Poland. We use a dynamic general equilibrium model with a search mechanism in the labour market, soft-linked to a microsimulation model based on household budget survey data. We evaluate the impact on various income groups and on inequality. We account for four key channels: the direct (energy) and indirect (other goods) price effects, behavioural adjustment of consumption, and changes in labour income. We consider three of ways to recycle the carbon tax revenue: lump-sum transfer, energy price subsidies, and labour tax reduction. We find that the distributional effects depend on the recycling of revenues. Using them to reduce labor taxation attenuates the negative effect of carbon tax on GDP and employment but increases inequality compared to a lump-sum transfer to households. This finding highlights the trade-off between efficiency and equity. Our results could be relevant for other countries producing fossil fuels, such as South Africa, Germany, or Australia.

Suggested Citation

  • Antosiewicz, Marek & Fuentes, J. Rodrigo & Lewandowski, Piotr & Witajewski-Baltvilks, Jan, 2022. "Distributional effects of emission pricing in a carbon-intensive economy: The case of Poland," Energy Policy, Elsevier, vol. 160(C).
    • Handle: RePEc:eee:enepol:v:160:y:2022:i:c:s0301421521005437
    DOI: 10.1016/j.enpol.2021.112678
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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Distributional Effects of Emission Pricing in a Carbon-Intensive Economy: The Case of Poland
      by Christian Zimmermann in NEP-DGE blog on 2021-08-08 16:24:31

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    Cited by:

    1. 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).
    2. Jakub Soko³owski & Jan Frankowski, 2023. "Is Poland on track to becoming another France? How to avoid social conflicts Sparked by a country’s climate policy," IBS Policy Papers 01/2023, Instytut Badan Strukturalnych.
    3. Daniela Kletzan-Slamanig & Claudia Kettner, 2023. "Energy, Greenhouse Gas Emissions and Climate Policies – Austria and Poland Compared," WIFO Working Papers 661, WIFO.
    4. Zhao, Jiqiang & Wu, Xianhua & Guo, Ji & Gao, Chao, 2022. "Allocation of SO2 emission rights in city agglomerations considering cross-border transmission of pollutants: A new network DEA model," Applied Energy, Elsevier, vol. 325(C).
    5. Jakub Sokolowski & Marek Antosiewicz & Piotr Lewandowski, 2022. "The economic effects of stopping Russian energy Import in Poland," IBS Research Reports 01/2022, Instytut Badan Strukturalnych.
    6. Cathal ODonoghue & Beenish Amjad & Jules Linden & Nora Lustig & Denisa Sologon & Yang Wang, 2023. "The Distributional Impact of Inflation in Pakistan: A Case Study of a New Price Focused Microsimulation Framework, PRICES," Papers 2310.00231, arXiv.org, revised Mar 2024.
    7. Rüb, Daniel, 2024. "Inequality beyond income quantiles: Distributional effects of climate mitigation policies," Ecological Economics, Elsevier, vol. 216(C).
    8. Rodríguez, M. & Teotónio, C. & Roebeling, P. & Fortes, P., 2023. "Targeting energy savings? Better on primary than final energy and less on intensity metrics," Energy Economics, Elsevier, vol. 125(C).
    9. Sokołowski, Jakub, 2023. "Peer effects on photovoltaics (PV) adoption and air quality spillovers in Poland," Energy Economics, Elsevier, vol. 125(C).
    10. 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).
    11. Jakub Sokołowski & Piotr Lewandowski & Jan Frankowski, 2023. "How to Prevent Yellow Vests? Evaluating Preferences for a Carbon Tax with a Discrete Choice Experiment," IBS Working Papers 03/2023, Instytut Badan Strukturalnych.

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    More about this item

    Keywords

    Climate policy; Carbon tax; Distributional effect; Microsimulation; General equilibrium; Employment;
    All these keywords.

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • P18 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Energy; Environment
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration

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