Conference Agenda

The (supposed) regressivity of (primarily price-based) climate protection policy instruments often obstructs an evidence-based discussion at the political level and is used as an argument against the implementation of corresponding measures. To assess the distributional implications of decarbonization, we developed climate policy scenarios for the buildings and mobility sectors including targeted compensation measures in close cooperation with stakeholders to identify socially acceptable pathways. Subsequently, three bottom-up sectoral models (for transport demand, vehicle choice and the building stock) were linked to a macroeconomic model to analyze the emission impact, the macroeconomic and distributional effects of the policy portfolios on different household types. The modeling of climate policy scenarios shows that decarbonization of housing and mobility in Austria by 2040 is achievable but requires a comprehensive policy portfolio and rapid implementation. While climate policies have positive macroeconomic effects, they also exacerbate inequality between different income groups. Therefore, a just transition requires targeted compensation for low- and middle-income households, such as recycling of revenues from carbon pricing, to mitigate adverse effects on income distribution and enable investments in renovation and new heating systems.

One potential nature-based solution to jointly address poverty and environmental concerns is large-scale tree planting. This study examines the National Greening Program (NGP) in the Philippines, a major tree planting initiative involving 80,522 localized projects that directly or indirectly generated hundreds of thousands of jobs. Utilizing a dynamic difference-in-differences approach that leverages the staggered implementation of the NGP, we find a significant and sizable reduction in poverty, measured via traditional and remotely sensed indicators. The NGP also spurred structural shifts, notably decreasing agricultural employment while boosting unskilled labor and service sector jobs. Our analysis estimates that the NGP sequestered 71.4 to 303 Mt CO2 over a decade, achieving a cost efficiency of $2 to $10 per averted tCO2. These findings underscore the potential of tree planting as a dual-purpose

strategy for climate mitigation and poverty alleviation.

Carbon pricing is the central pillar of European climate policy, but frequently faces opposition because of its associated distributional effects. Carbon pricing can disproportionately impact lower-income groups, but how such distributional effects evolve over time remains unclear. We investigate the distributional impacts of carbon pricing between 2005 and 2020 across 15

EU countries and attribute changes to sectoral decarbonization and shifts in consumption patterns driven by income growth or residual shifts. In two thirds of the countries, carbon pricing has become more regressive. Building on Index Decomposition Analysis, we show that heterogeneous shifts in consumption patterns were the most important driver of changing distributional effects. Unequal income growth can explain such shifts in part. Future developments, including decarbonization, income growth and increasing inequality, thus may disproportionately hurt lower-income groups, highlighting the need for timely compensation measures.

Carbon taxes are a crucial policy option for curbing carbon emissions1,2, but can deepen poverty and inequality, posing challenges for achieving a just transition. Revenue recycling is proposed to offset these regressive impacts3–5, yet practical implementation issues remain largely unexplored1. Here, we investigate the effectiveness of various revenue recycling mechanisms—both domestic and international, with an emphasis on social assistance-based recycling—and different carbon taxation structures using a Social Accounting Matrix-based model. Our findings indicate that paring a luxury consumption tax (applying higher tax rates on luxury goods) with revenue recycling through an expanded social assistance system as happened during the COVID-19 pandemic could achieve the most substantial reduction in extreme poverty. This approach proves the best option for most countries (109 out of 168). Furthermore, establishing a global carbon tax revenue fund financed by developed nations and distributed to developing countries based on poverty headcounts could markedly reduce poverty and inequality both within and between countries. However, substantial improvements in social assistance systems are urgently needed, especially in Sub-Saharan African countries. Overall, this study provides a viable pathway for synchronising carbon mitigation with poverty alleviation, contributing to the development of equitable climate policy.