This report reviews the literature on the distributional consequences of climate change and mitigation and transition pathways. The heterogeneous levels of exposure and vulnerability to climate change across countries, regions, households, and workers hint at the significant distributional costs of inaction. Climate policies will likely trigger a reallocation from “high-polluting” sectors to “green” sectors, disproportionately affecting certain regions and low-skilled workers. Price-based policies, such as carbon taxation, show varied effects across countries: they tend to be more regressive in developed countries and more progressive in developing countries where energy affordability and energy poverty are major concerns. Non-market-based policies are often regressive and can result in equity issues. Effective climate action requires balancing distributional outcomes, ensuring political acceptability, and understanding the link between policy perceptions and support.
