Between- and within-country distributional impacts from harmonizing carbon prices in the EU

This paper examines the distributional impacts from (i) harmonizing prices for carbon dioxide emissions across sectors and EU countries (ii) using alternative rules revenue distribution. We develop a numerical multi-country multi-sector general equilibrium model of EU-27 economy which resolves household income deciles, based on micro-survey data expenditure income, markets fossil fuels, electricity, (EU-wide national) tradeable rights. find that price harmonization yields efficiency gains at level. The effects between vary depend largely redistribution revenues. Based currently in place Phase IV ETS, flow disproportionately to low-income countries. Within-country incidence is progressive or neutral most when ignored, not much affected by harmonization. Per-capita-based lead strong outcomes yield households. Evaluating different policy options social welfare function incorporates inequality aversion suggests there no trade-off equity economy.