Distributional Issues in Climate Policy: Air Quality Co-benefits and Carbon Rent

The case for climate policy typically is made on grounds of inter-generational equity, with a presumed tradeoff between the environmental interests of future generations and the economic interests of the present generation. This framing of the problem neglects the scope for designing policies that not only mitigate climate change but also yield net benefits for all or most people who are alive today. This chapter considers two avenues by which climate policy can bring substantial immediate gains to the present generation, via (i) air quality co-benefits from reduced use of fossil fuels; and (ii) recycling of rent created by carbon pricing. Both avenues pose important issues of equity within the present generation.