Carbon Policy and Inclusive Growth

This paper analyzes the impact of carbon pricing on macroeconomic performance and inclusive development across 48 countries from 1989 to 2024. It finds that while carbon pricing significantly reduces emissions, it also carries notable macroeconomic costs. 

The policy is associated with higher income inequality and a decline in human development, with the adverse effects especially acute in countries with high public debt. 

However, countries with higher environmental spending experience far fewer negative impacts. Such spending both cushions the economic and social costs of carbon pricing and reinforces its effectiveness in reducing emissions.