IAM_COMPACT_D5.3_Climate_action_social_&_distributional impacts_Update

This document updates Deliverable D5.2, by presenting two new distributional analyses on inequality impacts of climate policies developed within IAM COMPACT. Each analysis applies a different methodology, building on earlier work while expanding the geographical scope and methodological complexity to better assess the inequality impacts of climate policies. The first analysis explores how different implementations of the EU’s climate policy portfolio affect various consumer groups across and within Member States. It finds that a general EU-wide carbon price, while cost-efficient, has regressive impacts, disproportionately burdening low-income households. In contrast, policies based on national plans (NECPs) are less regressive. Although income is the dominant factor influencing outcomes, gender, urban-rural location, and household structure also play a role. The second analysis evaluates global decarbonisation scenarios for passenger transport through to 2050, focusing on differentiated carbon taxes across income groups. It shows that uniform cost policies are regressive, burdening lower-income consumers, especially in air travel. In contrast, a global per capita emissions cap by 2050 sets heterogenous carbon prices, shielding low-income households, while the higher costs borne by wealthier individuals lead to a faster adoption of clean transport technologies, which may translate into faster decline of clean technology costs, thereby benefitting all consumers in a mitigation context. The model enhancements and inter-model connections presented in these analyses reflect major methodological progress developed in the project, offering a robust, integrated framework for evaluating the system-wide and distributional and impacts of climate policy.