According to the research, even though the pollution tax injures both high- and low-skilled labor through higher prices of goods and services, the wage rates for low-skilled labor also declines. In almost all of the study's economic models, the rebate of all revenue to low-skilled labor still does not prevent a reduction in their overall real net wages.
"If a firm is going to reduce its carbon emissions, it might do more of something else," Fullerton said. "In order to cut emissions, they might need more high-tech abatement capital and labor, and that means buying more high-skill labor. That drives up the high-skill wage, which is going to help high-wage earners but hurt lower income people through another mechanism. So the effects of pollution taxes are felt not only on the 'uses' side of income in the form of higher product prices, but also on the 'sources' side of income with declining relative wage rates for low skilled workers."
But just because the poor would bear a burden of a carbon tax doesn't mean it's not worth doing in some form or another, said Fullerton, who heads the environmental and energy economics program for the National Bureau of Economic Research, a nonprofit, nonpartisan think tank that provides economic analysis for government, business and the academic community.
"The take-home message is that there's no such thing as a free lunch," he said. "Everyone is going to bear some costs of carbon pricing, but the point of it is to avoid the even greater costs of global warming and climate change.
"Nobody wants to bear these costs, but the alternatives are much worse more carbon dioxide and greenhouse gases, more climate change, global warming, and more extreme weather events. All of these bad outcomes disproportionally hurt the poor."
|Contact: Phil Ciciora|
University of Illinois at Urbana-Champaign