Distributive Impacts from a Kyoto Policy

This research paper examines the distributive welfare impacts of energy price increases resulting from a Kyoto Protocol scenario—specifically a 6% reduction in carbon dioxide emissions from 1990 levels. Using a welfare model based on consumer surplus and data from the Canadian residential sector, the authors simulate how different income groups are affected and propose compensation mechanisms to ensure equity.

• When energy prices increase due to carbon constraints, low-income households experience the most significant drop in welfare (measured by consumer surplus), while high-income households experience the smallest drop, despite high-income groups seeing the largest absolute reduction in the quantity of energy consumed.
• In Canada, lower-income households allocate a disproportionately larger share of their budget to energy expenses compared to higher-income groups; specifically, the ratio of energy expenditure to total expenditure for the low-income group is 300% higher than that of the high-income group.
• An 'Egalitarian Simulation' demonstrates that equalizing the percentage change in consumer surplus across income groups requires a differentiated energy pricing system where high-income groups pay a higher price to facilitate a transfer of consumer surplus to lower-income groups.
• A 'Basic Need Simulation' shows that it is possible to ensure low- and middle-income groups experience no drop in energy consumption by implementing a price differential of $1.10/GJ, which results in a smaller loss of consumer surplus for the high-income group than the egalitarian scenario.
• Spatial analysis reveals regional disparities in Canada; low-income residents in Alberta face a more severe welfare drop (approximately 16%) compared to low-income residents in Ontario (approximately 11%) under a utilitarian regime.
• The authors argue that standard electricity pricing schemes—such as flat rate, two-part, block structure, or lifeline tariffs—fail to address distributive issues because they do not discriminate by income group. They propose an income-differentiated pricing system based on tax returns, potentially offset for high-income groups via tax rebates based on carbon emission reductions.

APA

Duraiappah, A. K., Guertin, C., & Khumbakar, S. (n.d.). Distributive Impacts from a Kyoto Policy. International Institute for Sustainable Development. https://www.iisd.org/system/files/publications/energy_distributive_impacts_kyoto.pdf

Chicago

Duraiappah, Anantha Kumar, Chantal Guertin, and Subal Khumbakar. Distributive Impacts from a Kyoto Policy. International Institute for Sustainable Development, n.d. https://www.iisd.org/system/files/publications/energy_distributive_impacts_kyoto.pdf.

Wikipedia

{{cite report |last1=Duraiappah |first1=Anantha Kumar |last2=Guertin |first2=Chantal |last3=Khumbakar |first3=Subal |title=Distributive Impacts from a Kyoto Policy |publisher=International Institute for Sustainable Development |url=https://www.iisd.org/system/files/publications/energy_distributive_impacts_kyoto.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{duraiappahnddistributive, author = {Duraiappah, Anantha Kumar and Guertin, Chantal and Khumbakar, Subal}, title = {{Distributive Impacts from a Kyoto Policy}}, institution = {International Institute for Sustainable Development}, url = {https://www.iisd.org/system/files/publications/energy_distributive_impacts_kyoto.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }