Regional Household Impacts of a Price on Carbon

Mar 1, 2010 | RFF Staff

The impacts on households of a potential price on carbons emissions vary widely across regions according to a new paper published in the journal Climatic Change.

In “Regional Patterns of U.S. Household Carbon Emissions,” RFF Nonresident Fellow James Sanchirico and coauthors Billy Pizer and Michael Batz use consumer expenditure data covering 1984–2000 to estimate the short-run geographical impacts of a hypothetical $10 per-ton tax on carbon dioxide.

U.S. households, on average, spent almost $4,000 per household on electricity, fuel oil, natural gas, and gasoline in 2005. These expenditures vary considerably over different regions and subpopulations across the country, a fact that policymakers are especially concerned with as they consider the design of climate policy and the crafting of adjustment and compensation programs to protect more vulnerable regions.

The authors find substantial differences across regions, with the direct impacts of the tax ranging from $97 dollars per year per household in Manhattan to $235 per year per household in Tensas Parish, Louisiana. Three factors account for the varying impacts: differences in energy use, carbon intensity of electricity generation, and electricity regulation. Over the longer run, the impact on households would be lower as consumers change behavior in response to higher prices, by investing in cars and appliances with greater fuel-efficiency, for example.

William A. Pizer is currently the deputy assistant secretary for environment and energy at the Treasury Department; his work on the paper was completed while he was a full-time senior fellow at RFF.