Tax distortions and global climate policy
By M. Babiker, Gilbert E. Metcalf, J. Reilly. 2003
128 citations recorded by the source corpus.
We consider the efficiency implications of policies to reduce global carbon emissions in a world with pre-existing tax distortions. We first note that the weak double-dividend, the proposition that the welfare improvement from a tax reform where environmental taxes are used to lower distorting taxes must be greater than the welfare improvement from a reform where the environmental taxes are returned in a lump sum fashion, need not hold in a world with multiple distortions. We then present a large-scale computable general equilibrium model of the world economy with distortionary taxation. We use this model to evaluate a number of policies to reduce carbon emissions. We find that the weak double dividend is not obtained in a number of European countries. Results also demonstrate the point that the interplay between carbon policies and pre-existing taxes can differ markedly across countries. Thus one must be cautious in extrapolating the results from a country specific analysis to other countries.
Subfields: Economics and Econometrics, Renewable Energy, Sustainability and the Environment
View Paper: https://www.semanticscholar.org/paper/ec189858cf657b7e1b2efe9161fee6e929492fa6
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Citations in the corpus
- Green Growth and the Efficient Use of Natural Resources (2012, background): “Some examples are Babiker et al. (2003) who considered the interaction of a carbon tax with existing market distortions; Matus et al. (2007, 2011), Nam et al. (2010) who investigated the market and broader welfare effects of the health effects of air pollution; Babiker et al. (2009) who examined the”
- Optimal Dynamic Carbon Taxes in a Climate–Economy Model with Distortionary Fiscal Policy (2019, methodology): “What carbon tax τEt can decentralize (23)? Substitute for equilibrium prices in (23) based on the producers’first order conditions (8) and (12).”
- Public acceptability of personal carbon trading and carbon tax (2010, background): “Recent work on trading and tax has looked at 64 political economy aspects and concentrated on welfare effects and political 65 acceptability (e.g. Babiker et al., 2003; Brannlund and Nordstrom, 2004; Crals 66 and Vereeck; 2005, Dinan and Rogers; 2002, Parry and Small, 2005; Pezzey, 67 2003; West…”
- The cost of climate policy in the United States (2009, background): “However, in countries with positive terms-of-trade effects or if auction revenue is used to cut existing distortionary taxes, there can be welfare gains from climate policy even with a positive CO2 price, especially for smaller reductions (e.g., see Babiker et al., 2003).”
- Exploring the Role of Carbon Taxation Policies on CO2 Emissions: Contextual Evidence from Tax Implementation and Non-Implementation European Countries (2020, result): “In particular, our empirical conclusions that policies relating to the carbon-tax have a positive impact on reducing CO2 are consistent with those obtained by Lin and Li [44] for the case of Denmark, Sweden, and the Netherlands.”