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  Climate action with revenue recycling has benefits for poverty, inequality and well-being

Budolfson, M., Dennig, F., Errickson, F., Feindt, S., Ferranna, M., Fleurbaey, M., Klenert, D., Kornek, U., Kuruc, K., Méjean, A., Peng, W., Scovronick, N., Spears, D., Wagner, F., Zuber, S. (2021): Climate action with revenue recycling has benefits for poverty, inequality and well-being. - Nature Climate Change, 11, 12, 1111-1116.
https://doi.org/10.1038/s41558-021-01217-0

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 Creators:
Budolfson, Mark1, Author
Dennig, Francis1, Author
Errickson, Frank1, Author
Feindt, Simon1, Author
Ferranna, Maddalena1, Author
Fleurbaey, Marc1, Author
Klenert, David1, Author
Kornek, Ulrike2, Author              
Kuruc, Kevin1, Author
Méjean, Aurélie1, Author
Peng, Wei1, Author
Scovronick, Noah1, Author
Spears, Dean1, Author
Wagner, Fabian1, Author
Zuber, Stéphane1, Author
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1External Organizations, ou_persistent22              
2Potsdam Institute for Climate Impact Research, ou_persistent13              

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 Abstract: Existing estimates of optimal climate policy ignore the possibility that carbon tax revenues could be used in a progressive way; model results therefore typically imply that near-term climate action comes at some cost to the poor. Using the Nested Inequalities Climate Economy (NICE) model, we show that an equal per capita refund of carbon tax revenues implies that achieving a 2 °C target can pay large and immediate dividends for improving well-being, reducing inequality and alleviating poverty. In an optimal policy calculation that weighs the benefits against the costs of mitigation, the recommended policy is characterized by aggressive near-term climate action followed by a slower climb towards full decarbonization; this pattern—which is driven by a carbon revenue Laffer curve—prevents runaway warming while also preserving tax revenues for redistribution. Accounting for these dynamics corrects a long-standing bias against strong immediate climate action in the optimal policy literature.

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 Dates: 2021-11-292021-12-29
 Publication Status: Finally published
 Pages: -
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 Rev. Type: Peer
 Identifiers: DOI: 10.1038/s41558-021-01217-0
PIKDOMAIN: RD3 - Transformation Pathways
Organisational keyword: RD3 - Transformation Pathways
MDB-ID: yes - 3345
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Title: Nature Climate Change
Source Genre: Journal, SCI, Scopus, p3
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Pages: - Volume / Issue: 11 (12) Sequence Number: - Start / End Page: 1111 - 1116 Identifier: CoNE: https://publications.pik-potsdam.de/cone/journals/resource/140414
Publisher: Nature