Distributional Impacts of Carbon Pricing on Accessibility Across Space and Incomes

Abstract

Urban transport is a major driver of global CO2 emissions, and, without strong mitigation strategies, its contribution is likely to increase with the rapid urbanization occurring in developing countries. There is a growing consensus on the fundamental role of carbon pricing for reducing CO2 emissions. However, carbon pricing policies are frequently criticized and resisted for having adverse distributional impacts, especially when they impact transit services, the cheapest motorized transport means. Policies affecting transport costs have impacts on household well-being. In the short term, they impact how much income is left after commuting expenses are incurred. But more generally, they impact accessibility to jobs, which is associated with reduced unemployment, better-paid jobs, and more formal and permanent employment. Accessibility is also a key determinant of where people can afford to live in urban areas. Carbon pricing can therefore negatively impact households, especially the poorest, by locking them out of the labor market or constraining them to live in locations with high housing costs.