chapter  8
27 Pages

Who’s hit? The distributional impacts of carbon pricing and how to handle them

If there is a price on carbon, someone has to pay it – indeed, that’s the point. Market economies are effi cient to the extent that people pay the real cost of something. But paying is never popular – particularly for something which, like CO 2 emissions, has previously been treated as free. Chapter 6 presented the evidence on why price matters and the basic economic case for pricing carbon. Long ago, the rich countries’ club – the OECD – agreed the economic principle of ‘polluter pays’ ( Chapter 1 ).