Neutral carbon tax and environmental targets in Brazil

Paula Pereda () and Andrea Lucchesi, Carolina Policarpo Garcia, Bruno Toni Palialol

No 2019_02, Working Papers, Department of Economics from University of São Paulo (FEA-USP)

Abstract: We evaluate the effects of a carbon tax in the Brazilian economy using an input-output framework. First, we consider the impacts of a carbon tax of US$ 10 and US$ 50/metric ton of CO2 equivalent. As usual, the adoption of the carbon tax generates adverse effects on GDP, wages and jobs in the short term, but reduces emissions and generates new government revenues, especially in the case of the greater tax. Second, we consider a broader tax system reform. In this reform, we replace distortionary taxes by a tax on value added. To compensate for the loss of government revenue, we assume a carbon tax with equivalent revenue. We find that the net effect is a GDP increase of 0.47%, the creation of 533 thousand jobs and reduction of 1.6 million tons of CO2 emissions. Both scenarios exempt exports and levy imports to correct adverse effects on the country’s competitiveness.

Keywords: carbon tax; input-output analysis; revenue-recycling effect; neutral tax burden (search for similar items in EconPapers)
JEL-codes: H22 Q52 Q58 (search for similar items in EconPapers)
Date: 2019-02-04
New Economics Papers: this item is included in nep-ene, nep-env, nep-lam and nep-pub
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Citations: View citations in EconPapers (4)

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