The Distributional Effects of Environmental Policy

The Distributional Effects of Environmental Policy

Edited by Ysé Serret and Nick Johnstone

This publication is a milestone in the analysis of the distributional impacts of environmental policy, building upon existing literature to simultaneously examine disparities in the distribution of environmental impacts and in the distribution of financial effects amongst households.

Chapter 2: Framework for Assessing the Distribution of Environmental Quality

David W. Pearce

Subjects: economics and finance, environmental economics, environment, environmental economics


David W. Pearce 1. THE ISSUE A sizeable empirical literature exists on the relationship between environmental quality and socio-economic groups within a nation’s borders.1 The hypothesis tested by this literature is that environmental quality is regressively distributed across socio-economic groups, that is, low-income groups are exposed to higher environmental risks than high-income groups. If this is true, and if the distribution across income groups is not freely chosen by those groups, then an issue of distributive equity arises. Regressive distributions could be deliberately chosen: it may be that low-income groups have a lower demand for environmental quality than high-income groups. Alternatively, higher levels of pollution may be connected with associated benefits – for example, lower property prices – that compensate those groups for higher environmental risk. But regressive distributions may also be the result of an unequal endowment of political power and limited ability to adjust to environmental risks. In so far as unequal political power explains the regressivity, an equity issue still arises. Even when power is fairly equally distributed, the public-good nature of many environmental goods, and hence the public-bad nature of the risks, may produce compromise allocations of the good that under-supply the good to higherincome groups and over-supply it to low-income groups, still producing an equity problem. These alternative explanations for regressivity of risks are explored in detail in Section 2. From a policy standpoint, equity is a goal of social and economic policy in OECD countries. What constitutes ‘equity’ is not straightforward and the issue is...

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