@article{db5ba304913944ae9b46ec308a8eaabb,
title = "The social cost of carbon and inequality: When local redistribution shapes global carbon prices",
abstract = "The social cost of carbon is a central metric for optimal carbon prices. Previous literature shows that inequality significantly influences the social cost of carbon, but mostly omits heterogeneity below the national level. We present an optimal taxation model of the social cost of carbon that accounts for inequality between and within countries. We find that climate and distributional policy can generally not be separated. If only one country does not compensate low-income households for disproportionate damages, the social cost of carbon tends to increase globally. Optimal carbon prices remain roughly unchanged if national redistribution leaves inequality between households unaffected by climate change and if the utility of households is approximately logarithmic in consumption.",
keywords = "Carbon tax, Climate change, Inequality, Optimal taxation, Social cost of carbon",
author = "Ulrike Kornek and David Klenert and Ottmar Edenhofer and Marc Fleurbaey",
note = "Funding Information: Ulrike Kornek received funding from the Deutsche Forschungsgemeinschaft (DFG) (Gesch{\"a}ftszeichen KO 5900/1-1 ). Funding Information: The authors thank Francis Dennig and Maddalena Ferranna for helpful comments, suggestions and support with the NICE model. We also thank Christian Flachsland, Max Franks and Linus Mattauch for reviewing earlier versions of the paper and for valuable comments and suggestions. Lastly, we thank the participants of the conferences EAERE 2017 and LAGV 2018 as well as participants of seminars at the University of Princeton and UC Berkeley for valuable discussions. Marc Fleurbaey worked on this manuscript while at the Woodrow Wilson School of Public and International Affairs-University Center for Human Values, Princeton University, Princeton, NJ 08544, USA, and received funding from Ciara Burnham. Ulrike Kornek worked on this manuscript while at the Princeton Environmental Institute, Princeton University. The authors declare that they have no known competing financial interests or personal relationships that could have appeared to influence the work reported in this paper. Ulrike Kornek received funding from the Deutsche Forschungsgemeinschaft (DFG) (Gesch{\"a}ftszeichen KO 5900/1-1). Publisher Copyright: {\textcopyright} 2021 The Authors",
year = "2021",
month = may,
doi = "10.1016/j.jeem.2021.102450",
language = "English (US)",
volume = "107",
journal = "Journal of Environmental Economics and Management",
issn = "0095-0696",
publisher = "Academic Press Inc.",
}