The E-axes Forum on Climate Change, Macroeconomics, and Finance

Diego Känzig

“The unequal economic consequences of carbon pricing”

Event description

From the abstract:

This paper studies how carbon pricing affects emissions, economic aggregates and inequality. Exploiting institutional features of the European carbon market and high-frequency data, I identify a carbon policy shock. I find that a tighter carbon pricing regime leads to a significant increase in energy prices, a persistent fall in emissions and an uptick in green innovation. This comes at the cost of a temporary fall in economic activity, which is not borne equally across society: poorer households lower their consumption significantly while richer households are less affected. Not only are the poor more exposed because of their higher energy share, they also experience a larger fall in their income. These indirect effects account for over 80 percent of the aggregate effect on consumption. A climate-economy model with heterogeneity in households’ energy shares, income incidence and marginal propensities to consume is able to account for these facts.

Moderator:

Anastasia Pappas
Founder, E-axes Forum

Diego Känzig

Diego is a final year PhD candidate in Economics at London Business School. His research interests are in macroeconomics and macro-finance, with a focus on climate change and inequality. His work seeks to advance two core research agendas. The first concerns the role of energy and climate change for financial and macroeconomic fluctuations. The second is to understand how economic inequality and household finance matter for the macroeconomy and macroeconomic policy. For his research on climate change, carbon taxes and inequality he was awarded the ECB’s Young Economist Prize in 2021.

Paper and slides

"The unequal economic consequences of carbon pricing" (Paper)

"The unequal economic consequences of carbon pricing" (Slides)

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