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Poverty and distributional effects of carbon pricing in low- and middle- income countries

  • Even though concerns about adverse distributional implications for the poor are one of the most important political challenges for carbon pricing, the existing literature reveals ambiguous results. For this reason, we assess the expected incidence of moderate carbon price increases for different income groups in 87 mostly low- and middle-income countries. Building on a consistent dataset and method, we find that for countries with per capita incomes of below USD 15,000 per year (at PPP-adjusted 2011 USD) carbon pricing has, on average, progressive distributional effects. We also develop a novel decomposition technique to show that distributional outcomes are primarily determined by differences among income groups in consumption patterns of energy, rather than of food, goods or services. We argue that an inverse U-shape relationship between energy expenditure shares and income explains why carbon pricing tends to be regressive in countries with relatively higher income. Since these countries are likely to have more financial resourcesEven though concerns about adverse distributional implications for the poor are one of the most important political challenges for carbon pricing, the existing literature reveals ambiguous results. For this reason, we assess the expected incidence of moderate carbon price increases for different income groups in 87 mostly low- and middle-income countries. Building on a consistent dataset and method, we find that for countries with per capita incomes of below USD 15,000 per year (at PPP-adjusted 2011 USD) carbon pricing has, on average, progressive distributional effects. We also develop a novel decomposition technique to show that distributional outcomes are primarily determined by differences among income groups in consumption patterns of energy, rather than of food, goods or services. We argue that an inverse U-shape relationship between energy expenditure shares and income explains why carbon pricing tends to be regressive in countries with relatively higher income. Since these countries are likely to have more financial resources and institutional capacities to deal with distributional issues, our findings suggest that mitigating climate change, raising domestic revenue and reducing economic inequality are not mutually exclusive, even in low- and middle-income countries.show moreshow less

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Metadaten
Author:Ira Irina Dorband, Michael Jakob, Matthias KalkuhlORCiDGND, Jan Christoph Steckel
URN:urn:nbn:de:kobv:517-opus4-424592
DOI:https://doi.org/10.25932/publishup-42459
ISSN:1867-5808
Parent Title (English):Postprints der Universität Potsdam : Wirtschafts- und Sozialwissenschaftliche Reihe
Subtitle (English):a global comparative analysis
Series (Serial Number):Postprints der Universität Potsdam : Wirtschafts- und Sozialwissenschaftliche Reihe (103)
Document Type:Postprint
Language:English
Date of first Publication:2019/02/22
Year of Completion:2018
Publishing Institution:Universität Potsdam
Release Date:2019/02/22
Tag:carbon pricing; decomposition analysis; distributional effect; global comparison; household data; low- and middle-income countries
Issue:103
Pagenumber:12
Source:World Development 115 (2019), pp. 246–257 DOI 10.1016/j.worlddev.2018.11.015
Organizational units:Wirtschafts- und Sozialwissenschaftliche Fakultät
Dewey Decimal Classification:3 Sozialwissenschaften / 30 Sozialwissenschaften, Soziologie / 300 Sozialwissenschaften
3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft
Peer Review:Referiert
Publication Way:Open Access
Licence (German):License LogoCreative Commons - Namensnennung, Nicht kommerziell, Keine Bearbeitung 4.0 International