2022-06-09-IMF-The_Distributional_Impact_of_a_Carbon_Tax_in_Asia_and_the_Pacific_50页_2mb

Summary of "The Distributional Impact of a Carbon Tax in Asia and the Pacific"

This IMF working paper analyzes the distributional impact of a $50 per ton carbon tax across 16 economies in the Asia-Pacific region, along with potential compensation schemes.

Key Findings

Regional Context

• Asia-Pacific accounts for 27% of historical CO₂ emissions and 49% of fossil fuel combustion emissions between 2000-2019
• The region's emissions are projected to grow by 16% by 2030
• Carbon prices in Asia-Pacific are among the lowest globally, averaging $6 per ton compared to Europe's $36 per ton

Methodology

1. Uses household surveys and input-output tables to model carbon tax impacts
2. Analyzes three main channels: higher energy prices, lower labor income in energy sectors, and household welfare
3. Considers various cash transfer compensation policies, including targeting methods

Distributional Impact

• Carbon tax burden varies widely by country:
  • Most regressive in Mongolia (11% of consumption) and Indonesia (7%)
  • Most progressive in Kiribati (2% loss for poorest, 3% for richest) and Myanmar
  • Proportional or moderately regressive in other economies
• Poorer households generally bear a heavier burden due to higher energy consumption as a share of their budgets and limited access to less carbon-intensive energy sources
• Labor income impacts are concentrated, though smaller in magnitude than price effects

Fiscal Considerations

• $50/ton carbon tax raises 1.4% of GDP on average across the region
• Most working papers compensation requires less than 35% of carbon tax revenues
• Cash transfers can shield the poorest 40% using proxy means testing

Policy Recommendations

• Country-specific carbon pricing can be designed with appropriate compensation
• Proxy means testing is a practical targeting approach for transfer programs
• Compensation through direct cash transfers is effective and affordable
• Revenues can be used to fund climate-responsive social protection systems

Policy Implications

• Distributional impacts must be addressed for carbon pricing to gain political support
• Properly designed revenues can facilitate just transitions and climate mitigation
• Compensation mechanisms should be timely and efficiently targeted to vulnerable households

Notes

• Methodology includes various compensation schemes from universal transfers to proxy means-tested transfers
• Results are robust across different carbon tax rates ($25-$75 per ton)
• Labor income impacts are generally smaller but concentrated among specific worker groups