Who Pays For Climate Regulation?
This policy brief examines the question of who ultimately pays
for U.S. greenhouse gas regulation to deal with climate change.
When a regulation raises costs for a polluter, those costs are borne
by owners, workers, and customers, to varying degrees. When the
price of intermediate products change, then industries that buy those
intermediate products may also pass costs along. Tracing the path of
such price changes through the economy is necessary to determine
who ultimately bears the costs of a regulation. Regional differences
among final consumers appear modest, though labor in coal-intensive
industries may suffer. Most industrial sectors are modestly impacted
though a few, such as electric power, cement, and fertilizer, are hit
hard by carbon regulations. In terms of consumers, carbon regulations
do appear to be somewhat regressive, with households in the lowest
10 percent of the income distribution paying roughly three times what
the richest 10 percent pays, in terms of cost as a percentage of income.
These findings can help shape a fairer and more politically palatable
path for regulating greenhouse gases in the United States, when and if
the politics are right for such an action.