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

Grant Allan, Patrizio Lecca, Peter McGregor and John Swales (j.k.swales@strath.ac.uk)

Ecological Economics, 2014, vol. 100, issue C, 40-50

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. We find 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.

Keywords: Carbon tax; CGE modelling; Double dividend; Regional economics (search for similar items in EconPapers)
JEL-codes: C68 Q51 Q58 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (57)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolec:v:100:y:2014:i:c:p:40-50

DOI: 10.1016/j.ecolecon.2014.01.012

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