Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/306514 
Year of Publication: 
2024
Citation: 
[Journal:] DIW Weekly Report [ISSN:] 2568-7697 [Volume:] 14 [Issue:] 43/44 [Year:] 2024 [Pages:] 251-259
Publisher: 
Deutsches Institut für Wirtschaftsforschung (DIW), Berlin
Abstract: 
With the transition from the German national emissions trading system to the European Emissions Trading System (EU ETS2) from 2027, final consumer prices for fossil motor and heating fuels are likely to rise significantly. This increase will affect low-income households more noticeably, as they spend a larger share of their income on energy than high-income households. Existing relief measures, such as the basic income scheme, the housing benefit, and subsidy programs, only partially reach these groups. A climate dividend that is automatically paid out to all residents largely mitigates excessive effects of the carbon pricing burden. However, additional aid and subsidy programs are required due to the remaining burdens on vulnerable low-income households with high energy consumption. These programs could be financed if above-average and high-income earners did not receive the climate dividend. Carbon pricing does not affect these groups as much and they generally have more opportunities to reduce their fossil energy consumption. Thus, the climate dividend should be paid to all households, but reduced unbureaucratically as a part of wage and income taxes for above-average and high-income earners.
Subjects: 
carbon pricing
climate dividend
redistribution
JEL: 
Q41
D31
H23
Persistent Identifier of the first edition: 
Document Type: 
Article

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