WP3 - Distributional effects for households

Work package 3 focuses on how climate policy and climate change induced damages affect the financial situation of households with different income levels in different countries.

On the policy side, the (re-)distributional effects of carbon prices as central policy instrument for climate mitigation are primarily assessed. Analyses are based on existing data from household expenditure surveys in numerous countries and regions which trace expenditure shares for different goods and on industry data. The effects of changes in carbon pricing will be analysed in various sectors and for various goods, from prices for energy carriers like gasoline, diesel, heating oil or electricity to food and services.

The analysis of distributional effects of climate change impacts will build on results from WP 2 on climate change induced damages. It will focus on case studies like droughts on Spain or tropical cyclones in Mexico.

The empirical approach is accompanied by a microsimulation approach. This allows to include the effects of demand responses and uncertainty: People can react to a loss in purchasing power by modifying their consumption patterns. It is very likely that the degree of adaptation will vary for different goods and income levels.