Chapter 17: Distributional effects of environmental trade measures
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This chapter investigates the distributional effects of environmental trade measures. Distributional effects are assigned to two channels: 'Use-side' effects describe which consumers bear the burden of changing prices, while 'source-side' effects describe shifts in income between sectors, factors of production and different groups of workers. This chapter presents simple statistics to characterize the distributional tendencies of climate policies in each of these channels. It then applies these statistics to assess the distributional effects of two types of policy instruments, Border Carbon Adjustments and Green Industrial Policy. The chapter concludes with a more detailed case study investigating the distributional effects of introducing Border Carbon Adjustments to complement an EU-wide carbon price. The chapter highlights the importance of modeling the effects of environmental trade policy at different scales, capturing shifts between countries, as well as shifts between sectors and income groups within them.

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