When do carbon markets reduce inequality? Article 6 transfers under alternative futures

This paper examines whether international carbon trading under Article 6 of the Paris Agreement can affect global inequality, rather than only the cost of mitigation. Using GCAM across 32 regions and contrasting SSP development futures, the study decomposes changes in the population-weighted global Gini into the effects of domestic mitigation burdens and cross-border ITMO transfers, with Theil decomposition used to distinguish between- and within-region channels. The results show that Article 6 can reduce between-region inequality when lower-income regions retain a comparative advantage in low-cost mitigation. Under the divergent SSP4 future, however, this progressive effect largely disappears as some poorer regions, particularly in Africa, shift from sellers to buyers. The analysis uses a maximalist global market as a benchmark, emphasizing that distributional outcomes depend fundamentally on development trajectories and mitigation capacity rather than on the market mechanism alone.