The social cost of carbon and inequality
The social cost of carbon is a monetary metric for the damage caused by the emission of an additional tonne of CO2. Previous literature has shown that accounting for inequality between countries significantly influences the social cost of carbon, but mostly omits heterogeneity below the national level. Using a model that features heterogeneity both between and within countries, this column demonstrates that climate and distributional policy can generally not be separated. In particular, it shows that a higher social cost of carbon may be called for globally under realistic expectations of existing inequality.
