The Distributional Impacts of Carbon Pricing on Households: A Literature Review

Abstract

Assessing macroeconomic impacts is essential to the design of cost-effective market-based environmental policies. As carbon pricing instruments (CPIs) take the center of the stage for emission abatement, their regressive nature gains attention and becomes a potential political obstacle to their implementation. Numerous studies analyze the distributional impacts of CPIs in individual jurisdictions and obtain various results, but there lacks an integrated view of patterns and variations of the results. By reviewing existing literature, this study finds that CPIs are generally regressive in developed countries with a few exceptions. For developing countries, no unanimous outcome is reached, but the results could be generalized into predictable patterns given the economic structures of the jurisdictions and designs of CPIs.