The equity and efficiency of carbon taxation: A multi-model, multi-country analysis
Abstract
Climate policies shape inequalities through their effects on structural change via the source of income channel, and on household expenditures via the use of income channel. We compare the impact of carbon pricing on within-country inequalities when tax revenues are recycled through lump-sum transfers or labor tax cuts. We account for the impact of the labor share on inequalities, and compare results across regions with contrasted levels of development, using four macroeconomic integrated assessment models. We find that accounting for the source of income reduces the performance gap between labor tax cuts and lump-sum transfers. Also, carbon pricing with revenue recycling is compatible with reducing inequality, and can increase the consumption of the poorest quartile. We highlight the central role of labor income in shaping the distributional consequences of climate policy beyond consumption-side price effects. Our results suggest that sustaining the labor share can strengthen the progressivity of climate policies.
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BibTeX
@article{mejean2026equity,
title = {{The equity and efficiency of carbon taxation: A multi-model, multi-country analysis}},
author = {Aurélie Méjean and Florian Leblanc and Julien Lefèvre and Dimitrios Fragkiadakis and Panagiotis Fragkos and Rafael Garaffa and Cormac Lynch and Toon Vandyck},
journal = {Climate Change Economics},
year = {2026},
month = sep,
doi = {10.1142/s2010007826400105},
url = {https://hal.science/hal-05751015v1},
note = {CC BY-NC-ND 4.0},
}
RIS
TY - JOUR
TI - The equity and efficiency of carbon taxation: A multi-model, multi-country analysis
AU - Aurélie Méjean
AU - Florian Leblanc
AU - Julien Lefèvre
AU - Dimitrios Fragkiadakis
AU - Panagiotis Fragkos
AU - Rafael Garaffa
AU - Cormac Lynch
AU - Toon Vandyck
PY - 2026
DA - 2026/09/15
JO - Climate Change Economics
DO - 10.1142/s2010007826400105
UR - https://hal.science/hal-05751015v1
AB - Climate policies shape inequalities through their effects on structural change via the source of income channel, and on household expenditures via the use of income channel. We compare the impact of carbon pricing on within-country inequalities when tax revenues are recycled through lump-sum transfers or labor tax cuts. We account for the impact of the labor share on inequalities, and compare results across regions with contrasted levels of development, using four macroeconomic integrated assessment models. We find that accounting for the source of income reduces the performance gap between labor tax cuts and lump-sum transfers. Also, carbon pricing with revenue recycling is compatible with reducing inequality, and can increase the consumption of the poorest quartile. We highlight the central role of labor income in shaping the distributional consequences of climate policy beyond consumption-side price effects. Our results suggest that sustaining the labor share can strengthen the progressivity of climate policies.
SN - 2010-0078
SN - 2010-0086
ER -