ABSTRACT
Most early studies of distributional effects focused on the cost burdens to different socio-economic groups, based on their expenditure patterns and the relative weighting of energy-intensive products in those patterns. More recent works, however, have put more emphasis on how household incomes could change as a result of environmental tax reform (ETR), for example through different methods of revenue recycling. This chapter explains the income inequality and features of households' consumption expenditure by five income classes in East Asia, with a focus on Japan and Korea. The E3ME-Asia model for Japan and Korea; data limitations make the analysis problematic for China and Taiwan. To illustrate the distributional impacts from climate policy in E3ME-Asia, a scenario with a high carbon price and no revenue recycling is considered. This chapter shows that the careful use of the revenues from ETR could lead to an improvement in income distribution in the short run.
