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Faculty of Economics

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Cavalcanti, T., Hasna, Z. and Santos, C.

Climate Change Mitigation Policies: Aggregate and Distributional Effects

CWPE20117

Abstract: We evaluate the aggregate and distributional effects of climate change mitigation policies using a multi-sector equilibrium model with intersectoral input–output linkages and worker heterogeneity calibrated to different countries. The introduction of carbon taxes leads to changes in relative prices and inputs reallocation, including labor. For the United States, reaching its Paris Agreement pledge would imply at most a 0.6% drop in output. This impact is distributed asymmetrically across sectors and individuals. Workers with a comparative advantage in dirty energy sectors who do not reallocate bear relatively more of the cost but constitute a small fraction of the labor force.

Keywords: Climate change, carbon taxes, worker heterogeneity, labor reallocation

JEL Codes: E13 H23 J24

Author links: Tiago Cavalcanti  Zeina Hasna  

PDF: http://www.econ.cam.ac.uk/research-files/repec/cam/pdf/cwpe20117.pdf

Open Access Link: https://doi.org/10.17863/CAM.62832

Keynes Fund Project(s):
Climate Change Mitigation Policies: Distributional and Allocative Effects (JHOV)