Pricing Carbon Prices With Impacts on the Poor in Mind

Inequality, climate impacts on the future poor, and carbon prices

Authors:

Dennig et al

Abstract:

Integrated assessment models of climate and the economy provide estimates of the social cost of carbon and inform climate policy. We create a variant of the Regional Integrated model of Climate and the Economy (RICE)—a regionally disaggregated version of the Dynamic Integrated model of Climate and the Economy (DICE)—in which we introduce a more fine-grained representation of economic inequalities within the model’s regions. This allows us to model the common observation that climate change impacts are not evenly distributed within regions and that poorer people are more vulnerable than the rest of the population. Our results suggest that this is important to the social cost of carbon—as significant, potentially, for the optimal carbon price as the debate between Stern and Nordhaus on discounting.