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Justice and income effects of climate policy

As the Netherlands transitions to climate-neutral energy systems in the future, costs are set to soar. In the period through to 2050 we estimate that costs will be around € 20 billion per annum on average: a combination of the cost of reducing carbon emissions and government taxes on these emissions. Costs will rise from € 5 billion in the current situation to a little less than € 40 billion in 2050. As climate policy is configured today, low-income households spend a little over 5% of their expendable budget on climate-policy-related costs. This is around 3.5 times as much as high-income households. If these costs continue to be allocated according to today’s climate policy configuration, low-income households will eventually be spending over 17% of their expendable income on the costs of climate policy – an unacceptable burden for such households. To avoid this situation there will need to be a change in the set-up of climate policy.

An equitable form of climate policy could comprise the following elements:
  • the polluter pays: small and large consumers pay the same per tonne CO2
  • the lowest-income groups are compensated for their energy-related tax burden, via a fixed rebate per household or via income tax, for example
  • compensation for industries unable to pass on high energy costs to consumers
  • any subsidies benefit all income groups equally.
As a follow-up study, it was investigated Who gains from climate policy?

Authors

Frans Rooijers
Robert Vergeer

Delft, January 2017

Justice and income effects of climate policy (only available in Dutch)

More information on this study can be obtained from  Robert Vergeer

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