Climate Policy, Air Pollution Impacts, and the Distribution of Income

Abstract

This paper examines how policies intended to reduce carbon dioxide (CO2) emissions affect air pollution exposure, mortality risk, and monetary benefits across the income distribution in the United States (U.S.). We use an energy system optimization model (ESOM) to translate several climate change mitigation policies into CO2-equivalent emission reductions. The ESOM also tracks emissions of three air pollutants: fine particulate matter, sulfur dioxide, and nitrogen oxides. The AP3 model links changes in emissions of local air pollutants to county-level ambient concentrations, exposure, mortality risk, and monetary damages. We present three central results. First, the monetary benefits from reduced air pollution exposure of the climate policies amount to less than 1% of real per capita income. Second, the monetary benefits are progressively distributed. Specifically, counties with a 10% higher real median income level tend to incur between 5% and 6% lower benefits from the carbon tax, the net zero scenario, and the clean electricity standard in 2030. These estimated elasticities are closer to zero in 2040 and 2050. Third, benefits are distributed progressively in the northeast and the western census regions, and regressively in the Midwest. In the southeast, benefits and income are uncorrelated.