Who Pays for a Price on Carbon?

by Corbett A. Grainger and Charles D. Kolstad

- We use the 2003 Consumer Expenditure Survey and emissions estimates from an input-output model to estimate the incidence of a price on carbon induced by a cap-and-trade program or carbon tax in the US context. We illustrate the main determinant of the regressivity: consumption patterns for energy-intensive goods. We find that a policy targeting CO2 from energy consumption is more regressive than a price on all emissions. Furthermore, on a per-capita basis a carbon price is much more regressive than calculations at the household level.

Grainger, C.A. and C.D. Kolstad (2009). "Who Pays a Price on Carbon?" NBER Working Paper No. 15239, August 2009.