PUTTING A PRICE ON CARBON: ENSURING EQUITY

The document analyzes how carbon taxes or cap-and-trade programs affect U.S. households through expenditures, income, and revenue allocation. While carbon pricing can be regressive in terms of energy expenditures—disproportionately affecting low-income households and coal-dependent regions—the authors argue that the overall impact is determined by how the government uses the revenue. By targeting a small portion of revenue (approximately 10-12%) toward low-income households and coal communities, policymakers can offset burdens and ensure these vulnerable groups are not driven deeper into poverty. The brief compares various revenue uses, such as lump-sum rebates, labor tax swaps, and capital tax swaps, concluding that the policy is not inherently regressive and can be designed to be progressive.

• The allocation of carbon pricing revenue is the most significant factor in determining whether a policy's overall impact is regressive or progressive across socioeconomic groups and regions.
• In isolation, carbon pricing is regressive regarding household expenditures because lower-income households spend a larger share of their budget on energy-intensive products.
• Regional disparities in expenditure effects are driven by the carbon intensity of local electricity production and transportation needs, with the highest burdens falling on rural counties in the Southeast, Midwest, and Great Plains.
• When considering sources of income alone (excluding expenditures and revenue), carbon pricing can be progressive because high-income households rely more on capital income, which is more affected than the government transfers that support low-income households.
• Lump-sum household rebates are highly progressive, benefiting the poorest households and regions, whereas capital income tax swaps are highly regressive, primarily benefiting the wealthiest households.
• A relatively small amount of total carbon pricing revenue—estimated between 11 and 12 percent—could be sufficient to fully offset the expenditure burdens for the poorest one-fifth of U.S. households.
• Coal industry workers and their communities face a disproportionate burden due to job losses, but the total annual salaries of coal miners (approximately $4.5 billion) are small compared to the potential annual revenue from a $30 per ton carbon price (approximately $150 billion).
• Environmental benefits, such as reduced local air pollution, are likely to provide the greatest health and economic gains to the same low-income and coal-dependent communities that face the highest expenditure costs.

APA

KAUFMAN, N., & KRAUSE, E. (2016). PUTTING A PRICE ON CARBON: ENSURING EQUITY. World Resources Institute. https://wriorg.s3.amazonaws.com/s3fs-public/Putting_a_Price_on_Carbon_Ensuring_Equity.pdf

Chicago

KAUFMAN, NOAH, and ELEANOR KRAUSE. PUTTING A PRICE ON CARBON: ENSURING EQUITY. World Resources Institute, 2016. https://wriorg.s3.amazonaws.com/s3fs-public/Putting_a_Price_on_Carbon_Ensuring_Equity.pdf.

Wikipedia

{{cite report |last1=KAUFMAN |first1=NOAH |last2=KRAUSE |first2=ELEANOR |title=PUTTING A PRICE ON CARBON: ENSURING EQUITY |publisher=World Resources Institute |date=2016 |url=https://wriorg.s3.amazonaws.com/s3fs-public/Putting_a_Price_on_Carbon_Ensuring_Equity.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{kaufman2016putting, author = {KAUFMAN, NOAH and KRAUSE, ELEANOR}, title = {{PUTTING A PRICE ON CARBON: ENSURING EQUITY}}, institution = {World Resources Institute}, year = {2016}, url = {https://wriorg.s3.amazonaws.com/s3fs-public/Putting_a_Price_on_Carbon_Ensuring_Equity.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }