The network origins of carbon pricing regressivity

Resumo

To study the distributive impacts of carbon pricing, we develop a multi-sector general equilibrium model with input-output linkages, heterogeneous households and labor-market segmentation. Input-output linkages propagate price shocks to polluting sectors through the production chains, affecting households through an expenditure channel, according to direct and indirect reliance on taxed goods, and an earnings channel, as type-specific labor demand and profit flows respond to shifting relative prices. Using Brazilian matched microdata, we find regressive effects stemming from both channels in similar intensities. Ignoring production networks leads to a substantial underestimation of both aggregate and distributional effects. Nevertheless, redistributing revenues via targeted social transfers significantly mitigates both inequality and output costs, whereas directing carbon revenues to generic government spending exacerbates skill-based wage gaps.

Ficha do documento

Tipo

Estudo

Ano

2025

Instituição

Fundação Getulio Vargas

Fonte

Repositório da FGV

Idioma

Inglês

Acesso

Acesso aberto

Identificador

oai:repositorio.fgv.br:10438/36711

Temas

Economia

Palavras-chave

Carbon pricingProduction networksInequalityHousehold heterogeneityEconomiaCarbono - PreçosCarbono - Aspectos políticos