The use of carbon pricing income in the United States is the key to solving regional differences.
On April 5, 2016, the World Resources Institute (WRI) released a report entitled "carbon pricing: ensuring equity" (Putting a Price on Carbon: Ensuring Equity) that income from carbon pricing policies can be used to address regional disparities and ensure that unfair burdens do not affect poor households. Compared with other alternatives, policy designers can allocate a small portion of carbon pricing income specifically to low-income households and coal mining communities to ensure that these groups receive more income.

The report points out that coal workers have been the backbone of the national economy over the past few decades, but with the gradual decline of the coal industry, countries need to draw very different development prospects. As one of a series of WRI studies on US carbon pricing, the report describes the different effects of US carbon pricing policies on different households and points out that the most important factor determining the difference in carbon pricing is how policy makers use carbon pricing income.
1? The impact of carbon pricing policy
The researchers divided the impact of carbon pricing policy into the following four parts: 1 the impact on household spending. Carbon prices affect household spending by affecting the prices of carbon-intensive energy products and services such as electricity, oil and household heating, as well as goods and services that are energy-intensive in the manufacturing process. (2) the influence on family income. Household wage income and investment income depend on the performance of all companies throughout the economy. Carbon prices affect the input costs of carbon-intensive companies, as well as their market share and competitors, thus affecting household incomes. (3) the impact of the use of carbon pricing income on households. Carbon pricing generates income, which can be used for different purposes, including providing household tax rebates, investing in clean energy, reducing the federal deficit, addressing regional differences, or subsidizing households that cannot pay for carbon prices. different ways of income use determine the effectiveness of carbon pricing policies. (4) Environmental benefit. Carbon prices will reduce climate change and local air pollution, thereby improving health and economic income, and there are small regional differences in these environmental benefits.
As consumers, workers, business owners, shareholders, taxpayers, beneficiaries of government welfare and community residents and other different roles, most families will basically be affected by the above four aspects. The different degree of impact of carbon pricing on a particular household depends on the characteristics of the family and the details of policy formulation. The empirical analysis of the impact of carbon pricing on the income distribution of all households in the United States (including only the impact of carbon prices and income use, without environmental benefits) is as follows: 1 as consumers, households that are most dependent on carbon-intensive energy (especially electricity) are the most affected by carbon prices. The areas most dependent on coal are the most affected, including communities in the southeastern, Midwestern, Great Plains and western mountains of the United States. (2) carbon price has little impact on the regional difference of household income, but without considering the use of income, workers in the coal industry will bear a disproportionate burden. (3) the increase in expenditure of low-income households is more obvious because of the larger proportion of energy-intensive products in their consumption structure. (4) the income of high-income households has declined more significantly, because their income is more dependent on capital income, which is more easily affected by carbon prices than wage income and government transfer expenditure. (5) the use of carbon pricing income is the most important factor affecting the distribution effect of policy.
The report notes that the impact of carbon pricing policies between different regions and socio-economic groups depends on decision makers. Stronger carbon prices bring in billions of dollars a year, and different ways of using income will lead to different distribution consequences. Using all carbon pricing income equally for household tax rebates will benefit low-income and poor families more, while using all income to reduce taxes on capital income will benefit higher-income households and richer and more capital-intensive areas. In reality, policy makers may use carbon pricing income in different ways for different goals. Therefore, carbon pricing policies are not necessarily regressive or progressive, nor will they bring benefits or disadvantages to some regions.
2? Recommendations on carbon pricing policies to ensure fairness
To ensure policy fairness, policy makers need to consider not only the overall or average impact of carbon pricing on different regions and socio-economic sectors, but also on a smaller range of vulnerable household groups. Research shows that two types of vulnerable groups are particularly in need of additional support. The first is the large number of low-income families who may not be able to afford any increase in spending, so carbon pricing should ensure that these households do not become poorer. The second category is the coal industry workers and their surrounding communities. The number of jobs in the coal industry has declined rapidly since 2008, and it is difficult for coal workers to find new jobs, resulting in serious economic difficulties in their rural communities. Carbon prices will further promote the transformation away from coal power, thus exacerbating the problems already faced by the communities where workers in the coal industry are working. But carbon pricing also creates plenty of opportunities to help these troubled communities by expanding health benefits, providing job search assistance and vocational training, supporting community development and infrastructure projects, and providing direct financial assistance.
Further study of specific policy proposals shows that fair carbon pricing policies require the distribution of income to other workers and households. These include industry workers who are extremely vulnerable to international competition, or residents living in areas that rely heavily on coal-fired power generation. In addition, the vast majority of carbon pricing revenue can be used for other purposes.
3? Advantages of implementing carbon pricing policy in the United States
The United States has pledged to cut economy-wide carbon emissions by 26%, 28% and 80%, respectively, from 2005 levels by 2025 and 2050, respectively. In the absence of a carbon pricing policy, we need to rely on other policies to achieve these goals. Other alternative policies will also have a distribution effect, but in contrast, carbon pricing policy will bring a lot of revenue to the government to alleviate the distribution problem, which is a key advantage of carbon pricing.
The report points out that the above optimistic conclusions are very different from many public opinions about the distribution effects of carbon pricing, which usually pay too much attention to energy prices. When considering carbon pricing as a whole, carbon pricing can also not destroy specific regions or specific socio-economic groups of the country. Policy makers can design a fair carbon pricing policy to reduce emissions in a cost-effective manner while addressing regional differences and protecting vulnerable households and workers in the country.




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