The distributional effects of carbon pricing: a global view of common but differentiated responsibilities

Abstract

In this Kühne Impact Series, we focus on the distributional effects of climate action. We simulate the distributional effects of a global carbon tax – the optimal economic policy tool in the fight against climate change – with or without international redistribution schemes. Our main result is that the economic costs of climate action are disproportionately borne by poor countries, but that realistic cross-country transfers could remedy this inequality. For example, annual North-South transfers of an average $200 per person would suffice to equalize the economic costs of climate action.