Tax Distortions and Global Climate Policy / Mustafa H. Babiker, Gilbert E. Metcalf, John Reilly.

Format:

Book

Author/Creator:

Babiker, Mustafa H. M.

Contributor:

Metcalf, Gilbert E.

Reilly, John.

National Bureau of Economic Research.

Series:

Working Paper Series (National Bureau of Economic Research) no. w9136.

NBER working paper series no. w9136

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2002.

Summary:

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.

Notes:

August 2002.

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