Assessing the Distributional Impacts of Carbon Pricing Mechanisms to Reduce Global Emissions (English)

This paper estimates the distributional effects of five carbon pricing mechanisms aimed at reducing global greenhouse gas emissions by linking a general equilibrium model with a global microsimulation. This paper finds that carbon mitigation policies have negative but small impacts on global poverty and inequality, although with large heterogeneity between countries. Pursuing a mitigation policy consistent with the nationally determined contributions would increase extreme poverty in 5 million people by 2050, while a more ambitious scenario that limits rising temperatures within 2 degree C could elevate the number of people living in extreme poverty to 10 million. This is equivalent to increases between 0.06 and 0.13 percentage points in the global extreme poverty headcount percent over 27 years, which is low by historical standards. The net effect on global inequality is small, but a decomposition of generalized entropy inequality shows opposing trends with reductions in the within-country component offsetting increases in between-country inequality.