Towards improved representation of distributional impacts of climate change and mitigation policies in model scenarios

Abstract

Climate mitigation policies and climate change damages can have unequal incidences both between and within countries. This paper examines the under-explored dynamics of within-country distributional impacts, focusing on residential energy expenditures and avoided climate change damages resulting from climate policies, using the Integrated Model to Assess the Global Environment (IMAGE). By looking at energy expenditures for different income groups for residential energy consumption, we find that - without redistributive policies - climate mitigation action achieved via carbon prices alone could disproportionately affect poorer population groups. This is the result of both changes in relative energy costs and high up-front investment needs for low-carbon solutions. At the same time, poorer population groups would likely benefit the most from the same mitigation action through avoided damages. Overall, this might lead to a net-progressive outcome. The presented scenario analysis indicates the need for equitable policies to protect low-income groups, particularly in low-income regions vulnerable to the largest impacts of climate change.