The economic and environmental impact of a carbon tax for Scotland: a computable general equilibrium analysis

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Abstract

Using a disaggregated energy–economy–environmental model, we investigate the economic and environmental impact of a Scottish specific carbon tax under three alternative assumptions about the use of the revenue raised by the tax: revenues raised are not recycled within Scotland; revenues are used to increase general government expenditure or to reduce Scottish income tax. Wefind that by imposing a tax of £50 per tonne of CO2 the 37% CO2 reduction target is met with a very rapid adjustment in all three cases if the model incorporates forward-looking behaviour. However, the adjustment is much slower if agents are myopic. In addition, the results of the model suggest that a carbon tax might simultaneously stimulate economic activity whilst reducing emissions and thus secure a double dividend, but only for the case in which the revenue is recycled through income tax.
Original languageEnglish
Pages (from-to)40-50
Number of pages11
JournalEcological Economics
Volume100
Early online date18 Feb 2014
DOIs
Publication statusPublished - 30 Apr 2014

Keywords

  • carbon tax
  • computable general equilibrium
  • environmental impact

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