An across and within country analysis of who bears the costs of EU decarbonisation

Abstract

Addressing climate change with the necessary urgency will only be successful if climate policies are perceived as socially fair and equitable by the majority of the population. However, as recognised in the IPCC Sixth Assessment Report (AR6), energy and climate modelling still struggles to bring together detailed economic and inequality impacts of climate policies. To help reduce this gap, we link GCAM-Europe, a geographical expansion of a well-established integrated assessment model, with MEDUSA, a tool for high-resolution distributional analysis. Our analysis explores how different implementations of the European Union (EU)‘s climate policy portfolio affect various consumer groups across and within Member States. It finds that a general EU-wide carbon price, while cost-efficient, has regressive impacts, disproportionately burdening low-income Member States and households. In contrast, policies based on national plans (NECPs) are less regressive. Gender and the urban-rural dimension also play an important role, with man-headed and rural households being the most affected.