The research study stressed that considering social inequalities and properly accounting for the distribution of consumption and damage within regions in climate modelling is of paramount importance. Without doubt, there is a trade-off between social and environmental objectives.
On the environmental side, a carbon tax stimulates a reduction in GHG emissions by dissuading households from consuming carbon-intensive products. On the social side, price increases can push vulnerable households into poverty. Furthermore, the redistribution of tax revenue aimed at reducing income inequality could drive up emissions, if it leads to an increase in demand for carbon intensive products.
However, the urgency surrounding climate change is forcing practitioners to prioritise the environmental benefits of the energy transition, while underestimating the induced social costs. Yet, the current level of income inequality within and between countries is still ominous. We believe that a future with growing inequality within or between regions could put the energy transient at risk because the public would not accept the kind of policies that are needed to address a fairer distribution of climate damage.
You can now read the full whitepaper at the link below
