1.1 Purpose of the Report This report is one of a number being prepared to help the Ministry for the Environment (MFE) and Climate Change Iwi Leaders Group (CCILG) better understand how climate change and climate change policies will affect Māori. The specific purpose of this report is to review relevant economic literatures on the incidence of emissions pricing and other climate change policies, with a focus on the implications of such pricing and policies on Māori cost of living. In doing so, it also addresses the ability of Māori to: 1. Mitigate (i.e. reduce) their greenhouse gas (GHG) emissions; and 2. Manage the impacts of emissions pricing, and adapt to climate change itself. 1.2 Defining Incidence and Cost of Living In this report “incidence” is taken to mean the ultimate bearing of either emissions pricing (i.e. liability for emitting GHGs) or other climate change policies. In other words, irrespective of to whom a liability for GHG emissions (which we refer to as “emissions” for convenience) has been attributed, which party of parties ultimately pays the cost of that liability? In the discussion that follows it will be clear that the ultimate incidence of emissions pricing will largely be shared among the consumers of liable emitters’ products, and suppliers of inputs (i.e. capital, labour, intermediate products) to those emitters. The question of who bears the costs of emissions pricing naturally leads in to the question of how such pricing affects the cost of living. Here, “cost of living” is taken to mean the cost of buying goods and services at a household level. As a consequence, the particular bundle of goods and services consumed by different household types will expose those households to differing levels of emissions charges. These charges are from the direct consumption of products on which emissions liability has been imposed (e.g. motor fuels) and some part of that charge has been impounded in prices. They are also from the change in prices of other consumed goods for which those products are intermediate goods (e.g. motor fuel prices affect freight charges, which then affect food prices). To assess the implications of emissions pricing incidence for Māori, it is therefore necessary to examine how Māori household consumption patterns – e.g. for fuel, electricity and food – differ from those of non-Māori households. This then enables a sense of the relative incidence of emissions pricing for Māori and non-Māori, and hence identifies whether, and in what ways, Māori households might bear more or less emissions pricing incidence than non-Māori households. To the extent that such analysis identifies disproportionate emissions pricing incidence for Māori households, this could assist in better targeting assistance via other aspects of climate change policy, or other policies, to address such incidence.