Fairness, effectiveness, and needs satisfaction: new options for designing climate policies

Abstract Financial compensations are often proposed to address regressive distributional impacts of carbon taxes. While financial have shown benefit vulnerable groups distributionally, little is known about their on emission reduction or needs satisfaction. A potential problem with cash that if households spend this money back into the economy while no additional decarbonisation policies implemented, reductions arose from tax may at least partly be reversed. In letter, we compare savings and fuel transport poverty two compensation options for taxes in 27 European countries. The first option consists equal per capita rebates home energy motor second provision universal green vouchers renewable electricity public transport, supported by investments infrastructures meet increased demand such consumption. Results show only supports small reductions. contrast, expanded would reduce emissions 92.3 MtCO 2 e 13.4%, 177.5 23.8%. If infrastructure were provided without a prior tax, slightly lower compared ‘tax voucher’ scheme, but drop 4.1 2.2 percentage points, respectively. increase 1.8 points. These findings demonstrate it important take environmental unfair climate account design stage. Such measures can achieve higher they involve an expansion goods services, everyone given fair access these services.