The E4BEL project is about putting equity at the forefront of the climate policy debate in Belgium. The path to net neutrality will entail a period of disruption as climate policies have a significant impact on society. Such policies, and carbon pricing, will affect different households’ purchasing power through heterogenous effects on consumption prices and, through changes in labor demand, on wage inequality. These equity impacts, and their subjective perception, partly explain public resistance and political reluctance to implement ambitious reforms. The Gilets Jaunes movement and the persistent job-killing argument used by opponents of green tax reform highlight how distributional issues drive public debate as much as rising concerns about global warming.
Our project will advance this debate by charting preferences for individuals on carbon pricing options and by novel economic modelling of the direct and indirect distributional impacts of such policies, with a focus on the loss of purchasing power through increases in consumer prices, wage changes by skill and occupation and losses of job opportunities in carbon intensive sectors, so called “brown jobs”. We will map the full medium-run labor market and distributional effects of a realistic climate tax shift and design policy packages that can generate maximum public and societal support.
More precisely, this should allow us to the following research questions:
- Does the equity-efficiency trade-off in carbon pricing hold when taking into account a wide range of effects, notably those on prices and wages?
- Can we expect significant transition costs of employment shifts between sectors?
- To what extent do labour market effects differ by skill, occupation, or tasks?
- Is there an equity-acceptability trade-off in carbon pricing, i.e. can a majority of voters be found while at the same time safeguarding equity concerns?
- Can standard economic measures explain opposition to climate tax shift options, or are other forces at play?
- Does providing information drawn from economic models’ impact analysis alter preferences or acceptability?
To this end, we will setup an intense cross-fertilization between different strands in economic impact analysis and sociological surveys on public acceptability.
Picture by Valena on Adobe Stock
