Motivation
Managing the global commons within planetary boundaries requires new knowledge on the impact of climate change and climate policy on individual well-being. Inequality aggravates climate damages and constrains climate action, especially in low- and middle income countries (LMIC). The impacts of shocks and policies on inequality need to be understood, while policies need to address multiple fiscal objectives.
This FutureLab analyses the role of inequality, human well-being and development for understanding the impacts of and responses to climate change from an economic perspective. On the one hand, econometric methods are applied to empirically assess the impact of policies and analyse surveys on public opinion about such policies. On the other hand, economic theory and philosophy of public policy are used to study how policies can successfully address the implications of emissions reductions on inequality and well-being. An additional focus will be on outcomes that are key to achieve resilient human development, such as health and nutrition.
The FutureLab, established in August 2020, is hosted by PIK’s Research Department 2 on Climate Resilience, while it closely interacts with the Mercator Research Institute on Global Commons and Climate Change (MCC) on the economics of inequality.
Publications
Inequality
The impacts of climate change on within-country inequality are not well understood to date. Further, in an economic context of rising wealth inequality within nation states, global solutions to climate change risk rejection by a citizenry distrustful of government. Our research aims at quantifying the climate impacts on inequality across households, using a micro-economic approach. Moreover, it aims to provide an account of which stricter mitigation policies are feasible under persisting inequalities.
Main research question
- Which inequalities impede stringent mitigation policies and how can they be overcome?
Human well-being
The impacts of climate change affect human well-being in diverse ways. Yet, so far, the focus has largely been on economic outcomes. To grasp the full impacts of climate change on individual well-being, our research will consider a wide range of economic and non-economic indicators, including household income, assets, life satisfaction, health, nutrition, and fertility.
Further, different normative points of view on individual well-being influence environmental policy recommendations. To date, mitigation policy instruments have hardly been examined in a way that appeals to citizens’ diverse values. It is not well understood which factors in the design of carbon prices, congestion charges, meat taxes, and direct regulation is appealing to citizens’ diverse identities and values. Further, health co-benefits of mitigation policies are not sufficiently framed as ‘behavioural-environmental second-best problems’, that is, the joint occurrence of an environmental externality and a behavioural failure.
Main research questions
- How can health co-benefits of environmental policy be represented in economic models?
- How can public support for environmental policy be determined by accounting for citizens’ values and identities?
Development
Political feasibility and public support for carbon pricing in low- and middle-income countries has not been analysed systematically. However, it is likely that governance challenges and low public support are a greater obstacle to price interventions than in high-income countries. In a majority of LMICs, a carbon price is found to be progressive and has high benefits in reducing tax evasion. These economic benefits, however, do not seem sufficient to overcome lack of public trust and high corruption as obstacles to mitigation policy.
Main research question
- How do proven concepts for designing environmental pricing in highly functioning governments translate to less developed economies?
Associated Members
- Christian Otto (RD3)
- Michael Pahle (RD3)
- Jan Steckel (MCC Berlin)
