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Title: Carbon Taxes in Spatial Equilibrium

Citation Type: Working Paper

Publication Year: 2022

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Abstract: Residential, industrial, and commercial carbon dioxide emissions vary substantially across cities and sectors; this variation has led to concerns about the distributional consequences of carbon pricing policies. I develop and estimate a spatial equilibrium model to quantify the incidence from a stylized carbon tax across cities, sectors, and education groups in the U.S. The model features heterogeneous households, firms in multiple locations , sectors that use energy and labor as imperfect substitutes, and region-specific carbon emissions rates due to differences in the fuel mix used to generate electricity. A uniform carbon tax has substantial distributional effects, with non-college-educated manufacturing workers living in the Midwest and South bearing the greatest burden. Cities with mild climates, carbon-efficient power plants, and services-oriented economies experience modest population increases as households move in response to the carbon tax. The share of the total tax burden attributable to coal-fired electricity varies significantly across regions. Additionally, I use the model to demonstrate that progressive compensation leads to a decline in aggregate carbon emissions due to a reallocation of workers into cities and less carbon-intensive sectors.

Url: https://www.johnmmorehouse.com/files/papers/jmp.pdf

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Authors: Morehouse, John M

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Data Collections: IPUMS USA

Topics: Population Mobility and Spatial Demography

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