Distributional Impacts and Household behaviour 2400-ZEWW1046
OBJECTIVE
The course equips students to answer, for any proposed climate policy, three questions that determine whether the policy is both effective and politically survivable: who bears the cost, how households will actually respond, and what can be done about the resulting distribution.
APPROACH AND LEVEL
Every analytical tool is introduced in class, on the climate-policy problem that motivates it, at the point where the argument requires it. Because the tools arrive embedded in substantive problems, students learn them as instruments of judgment.
STRUCTURE
I. From policy to price (sessions 1-2). What ETS2 does from 2027, and how a carbon price reaches a household. Relative prices, the household budget constraint, budget shares. Statutory versus economic incidence; pass-through; the role of elasticity in determining who really pays.
II. Measuring the burden (sessions 3-6). Burden as a share of income and as a share of expenditure, and why the choice of denominator changes the answer. Regressivity and progressivity measures. Lorenz curves, Gini and concentration coefficients. Energy poverty: expenditure-based, low-income/high-cost and consensual indicators, and the demonstration that the choice of definition, not the data, determines which households a policy will protect. Where the numbers come from: household budget surveys, EU-SILC, energy performance certificate microdata; equivalence scales; what the data cannot show.
III. How households respond (sessions 7-10). Price and income elasticities; substitution; demand systems. Behavioural constraints on response: the energy-efficiency gap, upfront cost barriers, split incentives, and present bias.
IV. Designing the response (sessions 11-13). Revenue recycling: lump-sum transfers, targeted transfers, labour tax reductions and energy price subsidies, compared on poverty reduction, climate effectiveness, fiscal cost and administrative feasibility. The timing problem: relief now versus retrofit later, and the sequencing that follows. Targeting: inclusion and exclusion error, take-up, and the trade-off between precision and administrative simplicity.
V. Acceptability and evidence (sessions 14-15). Salience, misperception of one's own position in the distribution, distrust of the compensation promise, and perceived fairness. Evidence from the French carbon tax episode and from EU survey data.
CLASSROOM METHOD
The course is taught as a lecture with structured paper-based work embedded in each session. Students are not required to use computers or statistical software; all quantitative work is done by hand on prepared household and building cards, with numbers drawn from the running cases.
ASSESSMENT ALIGNMENT
The written examination assesses the knowledge outcomes (S5_W1-W4) through short structured questions and the skills and competence outcomes (S5_U1-U4, S5_K1-K3) through extended applied questions.
Course coordinators
Type of course
Learning outcomes
The graduate knows and understands:
S5_W1 — the economic mechanisms described by contemporary micro- and macroeconomic theories that are critical for the design of a just transition;
S5_W2 — economic concepts and frameworks for economic analysis (e.g. welfare optimisation, fiscal policy);
S5_W3 — the distinction between model projections, forecasts and real economy behaviour;
S5_W4 — the potential distributional impacts of key climate policies in the EU.
The graduate is able to:
S5_U1 — use the key analytical tools employed in policy evaluation from an economic perspective: microsimulation models, econometric models, general equilibrium models;
S5_U2 — analyse the strengths and limitations of various analytical tools (e.g. microsimulations and general equilibrium models) and their outcomes;
S5_U3 — exploit the complementarity of tools to prepare a complete picture of policy impacts;
S5_U4 — communicate the results of analysis in an effective and comprehensible way.
The graduate is ready to:
S5_K1 — combine economic theory and results from different analytical models to form a comprehensive judgment on new policy solutions towards a green and just transition;
S5_K2 — evaluate new policy solutions across multiple dimensions, including their environmental, economic and social impacts;
S5_K3 — critically assess evidence provided in reports and papers on economic effects related to the low-carbon transition.
Assessment criteria
The graduate knows and understands:
S5_W1 — the economic mechanisms described by contemporary micro- and macroeconomic theories that are critical for the design of a just transition;
S5_W2 — economic concepts and frameworks for economic analysis (e.g. welfare optimisation, fiscal policy);
S5_W3 — the distinction between model projections, forecasts and real economy behaviour;
S5_W4 — the potential distributional impacts of key climate policies in the EU.
The graduate is able to:
S5_U1 — use the key analytical tools employed in policy evaluation from an economic perspective: microsimulation models, econometric models, general equilibrium models;
S5_U2 — analyse the strengths and limitations of various analytical tools (e.g. microsimulations and general equilibrium models) and their outcomes;
S5_U3 — exploit the complementarity of tools to prepare a complete picture of policy impacts;
S5_U4 — communicate the results of analysis in an effective and comprehensible way.
The graduate is ready to:
S5_K1 — combine economic theory and results from different analytical models to form a comprehensive judgment on new policy solutions towards a green and just transition;
S5_K2 — evaluate new policy solutions across multiple dimensions, including their environmental, economic and social impacts;
S5_K3 — critically assess evidence provided in reports and papers on economic effects related to the low-carbon transition.