May 21, 2020 - 11:00 AM - 1:00 PM
MIT CEEPR Virtual Associates Meeting followed by a research presentation from Director Christopher Knittel -“Distributed Effects of Climate Policy in the US”
We assess the net effects of various climate policies on households in the United States with particular attention to the distribution across geography, urbanity, and income groups. Using machine learning, we created a statistical model of a household carbon footprint (HCF) for the average household in each Census Tract. The effect of policy was quantified according to the net increase or decrease of costs each household experienced under 10 different policy scenarios, which included both carbon pricing schemes and regulatory standards. We find that there is significant variation in carbon footprint with income and geography; income effects are mostly driven by higher footprints related to transportation and consumer products and services while geographic effects are affected by the carbon intensity of the electricity grid. Regulatory policy tends to be regressive in effect and is on average a net cost to households who are low income — especially those in rural areas. Carbon pricing, when accompanied with a dividend, is progressive for urban, rural, and suburban households. There are transfers from the Midwest and Plains to the Coasts when the dividend is evenly divided, but this can be mitigated though adjusting the dividend slightly (<10% increase or decrease). Adjusting the dividend to increase the amount for low-income households and reduce the amount for high-income households benefits rural households more on average but increases the overall heterogeneity of impacts within each income group. Adjusting the dividend for both geography and urbanity increases the average benefit to low-income households and reduces the heterogeneity of impacts within income groups.