Climate policies: equity measures for fair distribution and public acceptance - the example of France & Switzerland

Abstract

As climate change is already happening, the danger of severe impacts requests immediate action. Although economic theory highlights the need for specific policies as tools against ecological issues, social equity is also significant. To design economically efficient climate change policies that are socially acceptable, we need to understand their distributional effects and avoid adverse impacts on the poor. This paper focuses on the distributional implications of climate policies in the weaker part of society. Yellow Vest protests in Paris proved that carbon taxation leads to inequalities and low public support, underlining the need to design specific measures. Chapter 1 presents decarbonization policies and their regressive effects on lower-income households and citizens. Moreover, a discussion follows about the macroeconomic issues in labor markets. Chapter 2 reveals mitigation measures against regressive distributional impacts of climate policies and the proper steps to choose which ones to take. The third chapter explains the necessity of energy taxation policies, especially carbon tax, and the risk of adverse public reactions if these are not widely accepted. Considering the example of Yellow Vests protesting in France compared to the complete acceptance of the increasing carbon tax in countries like Switzerland, the question is why there is such a difference in citizens' reactions and what can be done to avoid similar phenomena in the future. By comparing the policy framework of the two countries in carbon tax use, we identify significant differences during the last decade. The final chapter presents an empirical analysis undertaken on the existence and the extent of the relationship between income inequalities and environmental taxes, fossil fuel subsidies, real GDP growth, and the employment rate for France and Switzerland. The analysis continues examining the relationship between trust to the government and the same four variables for the two countries. The outcomes assist in finding the reasons leading to income inequalities and the reasons prohibiting the public acceptance of environmental policy measures and triggering protests. In the end, we conclude the findings.