Within-country inequality and climate change - A model for IAMs with an application to multiple countries
Yu Zheng (Centre d'études prospectives et d'informations internationales)
Johannes Emmerling (European Institute for the Economics and the Environment (EIEE))
Carolina Grottera (Universidade Federal Fluminense)
G. Marangoni (TU Delft - Policy Analysis)
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Abstract
The role of inequality for the evaluation and policy response to climate change has received great attention in recent years. Yet, endogenizing the evolvement of inequality has so far not been addressed with standard IAMs widely used. We address this research gap by developing an inequality module based on household deciles and an optimization routine for each group of households. Capturing skill premia, capital income dynamics, and consumption heterogeneity including energy and food consumption, we are able to endogenously simulate the impact of carbon prices and other macroeconomic drivers on the evolvement of inequality consistent with the IAM socioeconomic and climate scenarios. Moreover, we validate the module by a hind-casting exercise and find broad consistence with observed inequality trends.