This website uses cookies.

By clicking the "Accept" button or continuing to browse our site, you agree to first-party and session-only cookies being stored on your device to enhance site navigation and analyze site performance and traffic. For more information on our use of cookies, please see our Privacy Policy.

  1. Home
  2. Journals
  3. American Economic Review
  4. Forthcoming Articles
  5. The Unequal Economic Consequences of Carbon Pricing

American Economic Review

ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)

The Unequal Economic Consequences of Carbon Pricing

  • Diego R. Känzig
American Economic Review (Forthcoming)

Abstract

This paper studies the economic impacts of carbon pricing. Exploiting institutional features of the European carbon market and high-frequency data, I identify carbon policy shocks and trace their dynamic effects. A restrictive carbon policy shock raises energy prices, reduces emissions, spurs green innovation, but decreases economic activity—disproportionately burdening poorer households. Not only are the poor more affected because of their higher energy spending, but they also experience larger income losses. These indirect, general-equilibrium effects via income and employment play an important role in the transmission of carbon pricing policies, accounting for about two-thirds of the aggregate consumption response.

Downloads