Jacob Edenhofer (@jacobedenhofer.bsky.social)

Carbon pricing and inequality: Understanding the distributional costs of climate policy Carbon pricing is widely regarded as an effective tool to reduce greenhouse gas emissions, yet it often faces strong public resistance. This column combines macroeconomic evidence with detailed household data to examine the distributional economic effects of carbon pricing in Europe. The authors find that the economic costs of carbon policy-induced energy price increases are economically meaningful and highly uneven across households, with young and low-income households bearing the largest burden. Importantly, these effects are driven primarily by declines in labour income rather than by higher consumer prices. The findings highlight the importance of accounting for distributional impacts when designing climate policy. https://cepr.org/voxeu/columns/carbon-pricing-and-inequality-understanding-distributional-costs-climate-policy