Climate Policy and Inequality in Urban Areas
Opposition to climate policies seems to arise, at least partly, from their effects on inequality. However, so far, the impact of climate policies on inequality has mainly been studied through the lens of income inequality, and their spatial dimension is poorly understood. This paper, using Cape Town, South Africa, as a case study, investigates the impact of a fuel tax on both spatial and income inequalities. It uses a model derived from the standard urban economics land use model, accounting for four income classes and four housing types. This modeling framework allows decomposing the impacts of the tax by income class, housing type, and housing location. The analysis also decomposes the impacts of the tax over different timeframes, assuming that households and developers progressively adapt to the tax. The findings reveal strong evidence that in the short term, there are both income and spatial inequalities, with households being more negatively impacted by the fuel tax if they earn low incomes or live far from employment centers. In the medium and long term, these inequalities persist: the poorest households, living in informal settlements or subsidized housing, have few or no ways to adapt to changes in fuel prices by changing housing type, adjusting their dwelling sizes or locations, or shifting transportation modes. Low-income households living in formal housing also remain impacted by the tax over the long term due to complex effects driven by the competition with richer households on the housing market. Complementary policies promoting a functioning labor market that allows people to change jobs easily, affordable public transportation, or subsidies helping low-income households to rent houses closer to employment centers will be key to enable the social acceptability of climate policies.
| Main Authors: | , , , , |
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| Format: | Working Paper biblioteca |
| Language: | English English |
| Published: |
World Bank, Washington, DC
2022-09
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| Subjects: | INEQUALITY, FUEL TAX , SPATIAL INEQUALITY, INCOME INEQUALITY, AFFORDABLE URBAN HOUSING, CLIMATE POLICY REFORM, URBAN ECONOMICS, LAND USE, TRANSPORT INTEGRATED MODEL, EMISSION MITIGATION, REDISTRIBUTIVE IMPACTS, HOUSING MARKETS, TRANSPORTATION CLIMATE POLICY, |
| Online Access: | http://documents.worldbank.org/curated/en/099435009192218701/IDU064cb89c9021ad048e20bd5a0c2f0100dbc7e http://hdl.handle.net/10986/38040 |
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| Summary: | Opposition to climate policies seems
to arise, at least partly, from their effects on inequality.
However, so far, the impact of climate policies on
inequality has mainly been studied through the lens of
income inequality, and their spatial dimension is poorly
understood. This paper, using Cape Town, South Africa, as a
case study, investigates the impact of a fuel tax on both
spatial and income inequalities. It uses a model derived
from the standard urban economics land use model, accounting
for four income classes and four housing types. This
modeling framework allows decomposing the impacts of the tax
by income class, housing type, and housing location. The
analysis also decomposes the impacts of the tax over
different timeframes, assuming that households and
developers progressively adapt to the tax. The findings
reveal strong evidence that in the short term, there are
both income and spatial inequalities, with households being
more negatively impacted by the fuel tax if they earn low
incomes or live far from employment centers. In the medium
and long term, these inequalities persist: the poorest
households, living in informal settlements or subsidized
housing, have few or no ways to adapt to changes in fuel
prices by changing housing type, adjusting their dwelling
sizes or locations, or shifting transportation modes.
Low-income households living in formal housing also remain
impacted by the tax over the long term due to complex
effects driven by the competition with richer households on
the housing market. Complementary policies promoting a
functioning labor market that allows people to change jobs
easily, affordable public transportation, or subsidies
helping low-income households to rent houses closer to
employment centers will be key to enable the social
acceptability of climate policies. |
|---|