Who pays for higher carbon prices?
Illustration for Lithuania and a research agenda
This paper lays out an approach, and a research agenda, for assessing the impact of
carbon pricing on household budgets. It relies on a rich set of available data and
policy models and combines them in a way that is informative for mapping the gains
and losses at the household level in the short term as countries transition to a low-carbon
economy. After accounting for direct burdens from higher fuel prices, indirect effects
from higher prices of goods other than fuel, and households’ behavioural responses,
overall burdens are only mildly regressive. Recycling carbon-tax revenues back to
households allows considerable scope for avoiding or cushioning losses for large parts
of the population, and existing policy models can be used to design compensation measures
that facilitate majority support for carbon tax packages.
Published on January 30, 2023
In series:OECD Social, Employment and Migration Working Papersview more titles