Abstract
We examine the cost-side income distribution impacts of a carbon tax in the Susquehanna River Basin (SRB) Region of the United States utilizing a computable general equilibrium model. We find the aggregate impacts of a $25/ton carbon tax on the SRB economy are likely to be negative but modest-an approximately one-third of 1% reduction in Gross Regional Product (GRP) in the short-run and double that amount in the long-run. However, unlike many previous studies, we find that the carbon tax is mildly progressive as measured by income bracket changes, per capita equivalent variation, and Gini coefficient changes based on expenditure patterns. The dominant factors affecting the distributional impacts are the pattern of output, income and consumption impacts that affect lower income groups relatively less than higher income ones, an increase in transfer payments favoring lower income groups, and decreased corporate profits absorbed primarily by higher income groups.
| Original language | English |
|---|---|
| Pages (from-to) | 520-544 |
| Number of pages | 25 |
| Journal | Energy Economics |
| Volume | 29 |
| Issue number | 3 |
| DOIs | |
| State | Published - May 2007 |
Funding
The authors wish to acknowledge the funding support of the National Science Foundation (Grant No. SBR-9521952) through Penn State's Center for Integrated Regional Assessment of Climate Change. The authors wish to thank Tom Tietenberg, Denny Ellerman, and Ian Parry for helpful comments on earlier drafts. An earlier version of this paper was presented at the Annual Meeting of the European Association of Environmental and Resource Economists, Bilbao, Spain, June 2003, and at the North American Meetings of the International Association for Energy Economics, Philadelphia, PA, July 2004.
Keywords
- Carbon tax
- Climate change policy
- Computable general equilibrium
- Distributional impacts
- Regional economic analysis