The Incidence of US Climate Policy
Posted by Rich Sweeney on September 10, 2008
Last week Dallas Burtraw, Margaret Walls and I released a new RFF discussion paper titled, “Where You Stand Depends On Where You Sit: The Incidence of US Climate Policy.” In it we analyze the first-order impacts of 10 different cap-and-trade policy alternatives across regions and income groups. Rather than overtly advocating one policy or attempting to optimize outcomes along some predefined dimension, this initial report is intended largely to highlight the potential distributional effects of capping carbon and to describe the broad range of options available for policymakers to address these effects. There’s too much in the paper for me to summarize here, and I expect different readers to take different conclusions away from it, depending on their interests and familiarity with the issue. That being said, the most basic conclusion of the paper can be summed up as follows:
1) Consumption patterns and carbon footprints vary across regions and income groups. Accordingly, the effects of placing a price on carbon will also vary along these dimensions.
2) At the same time, pricing carbon will also create an enormous new asset for the government to redistribute. How policymakers decide to allocate this value will, in the end, determine who bears the cost of US climate policy.
I should reemphasize that this is still a discussion paper, so please feel free to contact me with comments. We’ve already received a lot of really great feedback, and plan to revisit the paper at some point in the near future. Finally, Dallas is slated to testify before Ways and Means on this and other climate policy issues next week. Word is that Bloomberg’s gonna be on the panel as well. Stay tuned.