In search of redistribution-effective carbon tax regime

Xiaojun Shi, Shunming Zhang

Abstract: This paper runs extensive numerical experiments to find the global redistribution-effective carbon tax regime. We discuss two broad categories of schemes, namely, the bottom-up type constant-rate and top-down type constant-revenue ones. On a comparable basis, we compare these two broad categories of schemes using the notion of elasticity. We conclude that, in both the bottom-up and top-down paradigms, progressive schemes has the largest redistribution effects in terms of reducing global inequality. Exemption has a V-shaped pattern in equalizing. We recommend a constant-revenue type carbon tax with small amount of emissions exemption for every country as the most pro-poor scheme.