TY  - RPRT
A1  - Eydam, Ulrich
T1  - The Distributional Implications of Climate Policies Under Uncertainty
T2  - CEPA Discussion Papers
N2  - Promoting the decarbonization of economic activity through climate policies raises many questions. From a macroeconomic perspective, it is important to understand how these policies perform under uncertainty, how they affect short-run dynamics and to what extent they have distributional effects. In addition, uncertainties directly associated with climate policies, such as uncertainty about the carbon budget or emission intensities, become relevant aspects. We study the implications of emission reduction schemes within a Two-Agent New-Keynesian (TANK) model. This quantitative exercise, based on data for the German economy, provides various insights. In the light of frictions and fluctuations, compared to other instruments, a carbon price (i.e. tax) is associated with lower volatility in output and consumption. In terms of aggregate welfare, price instruments are found to be preferable. Conditional on the distribution of revenues from climate policies, quantity instruments can exert regressive effects, posing a larger economic loss on wealth-poor households, whereas price instruments are moderately progressive. Finally, we find that unexpected changes in climate policies can induce substantial aggregate adjustments. With uncertainty about the carbon budget, the costs of adjustment are larger under quantity instruments.
T3  - CEPA Discussion Papers - 33 
KW  - Macroeconomic Dynamics
KW  - Environmental Policy
KW  - Inequality
KW  - Policy Design
Y1  - 2021
U6  - http://nbn-resolving.de/urn/resolver.pl?urn:nbn:de:kobv:517-opus4-508950
SN  - 2628-653X
IS  - 33
ER  -