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Title: Equity implications of net-zero emissions: A multi-model analysis of energy expenditures across income classes under economy-wide deep decarbonization policies

Journal Article · · Energy and Climate Change
ORCiD logo [1];  [2];  [3];  [4]; ORCiD logo [5];  [6];  [3]; ORCiD logo [7];  [6];  [1];  [1];  [8];  [4];  [9];  [10];  [11]
  1. Electric Power Research Inst. (EPRI), Palo Alto, CA (United States)
  2. US Department of Energy (USDOE), Washington DC (United States)
  3. US Environmental Protection Agency (EPA), Washington, DC (United States)
  4. RFF-CMCC European Institute on Economics and the Environment, Milan (Italy)
  5. Pacific Northwest National Laboratory (PNNL), Richland, WA (United States)
  6. Energy Innovation, San Francisco, CA (United States)
  7. Korea Advanced Insitute. Science and Technology (KAIST), Daejeon (Korea, Republic of)
  8. National Renewable Energy Laboratory (NREL), Golden, CO (United States)
  9. Stanford University, CA (United States)
  10. RTI International, Durham, NC (United States)
  11. Massachusetts Inst. of Technology (MIT), Cambridge, MA (United States)
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With companies, states, and countries targeting net-zero emissions around midcentury, there are questions about how these targets alter household welfare and finances, including distributional effects across income groups. This paper examines the distributional dimensions of technology transitions and net-zero policies with a focus on welfare impacts across household incomes. The analysis uses a model intercomparison with a range of energy-economy models using harmonized policy scenarios reaching economy-wide, net-zero CO2 emissions across the United States in 2050. Here we employ a novel linking approach that connects output from detailed energy system models with survey microdata on energy expenditures across income classes to provide distributional analysis of net-zero policies. Although there are differences in model structure and input assumptions, we find broad agreement in qualitative trends in policy incidence and energy burdens across income groups. Models generally agree that direct energy expenditures for many households will likely decline over time with reference and net-zero policies. However, there is variation in the extent of changes relative to current levels, energy burdens relative to reference levels, and electricity expenditures. Policy design, primarily how climate policy revenues are used, has first-order impacts on distributional outcomes. Net-zero policy costs, in both absolute and relative terms, are unevenly distributed across households, and relative increases in energy expenditures are higher for lowest-income households. However, we also find that recycled revenues from climate policies have countervailing effects when rebated on a per-capita basis, offsetting higher energy burdens and potentially even leading to net progressive outcomes. Model results also show carbon Laffer curves, where revenues from net-zero policies increase but then decline with higher stringencies, which can diminish the progressive effects of climate policies. We also illustrate how using annual income deciles for distributional analysis instead of expenditure deciles can overstate the progressivity of emissions policies by overweighting revenue impacts on the lowest-income deciles.

Research Organization:
National Renewable Energy Laboratory (NREL), Golden, CO (United States); Pacific Northwest National Laboratory (PNNL), Richland, WA (United States)
Sponsoring Organization:
USDOE Office of Energy Efficiency and Renewable Energy (EERE); European Union's Horizon 2020; European Research Council (ERC)
Grant/Contract Number:
AC36-08GO28308; 101022622; 853487; AC05-76RL01830
OSTI ID:
2282298
Alternate ID(s):
OSTI ID: 2340098
Report Number(s):
NREL/JA-5500-88596; PNNL-ACT-SA-10834; MainId:89375; UUID:bd2d72a1-c990-494c-97a8-39e5cdca0f55; MainAdminId:71603
Journal Information:
Energy and Climate Change, Vol. 5; ISSN 2666-2787
Publisher:
ElsevierCopyright Statement
Country of Publication:
United States
Language:
English

References (16)

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Climate action with revenue recycling has benefits for poverty, inequality and well-being journal November 2021
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Carbon Pricing, Clean Electricity Standards, and Clean Electricity Subsidies on the Path to Zero Emissions journal January 2023
On the Economics of a Carbon Tax for the United States journal January 2019
Income Inequality and Mortality in US Counties: Does Minority Racial Concentration Matter? journal January 2002

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29 ENERGY PLANNING, POLICY, AND ECONOMY
carbon Laffer curve
distributional impacts
equity
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