A Carbon Wealth Tax: Modelling, Empirics, and Policy

Neves José Pedro Bastos () and Semmler Willi
Additional contact information
Neves José Pedro Bastos: Brazilian Ministry of Finance, Brasília, Brasília, Brazil
Semmler Willi: The New School, New York, USA

Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), 2025, vol. 245, issue 6, 643-672

Abstract: Although economists widely advocate carbon pricing as an effective solution to reduce carbon emissions, this mechanism has had so far limited effects. This paper proposes a new type of tax to help finance (and accelerate) the green transition. A carbon wealth tax (CWT) is proposed to be levied on carbon-intensive (brown) wealth rather than primarily on carbon-intensive goods. We consider tax implementation issues such as tax base, incidence, and efficiency. Moreover, we analyze the impacts of such a tax scheme by setting up a model of asset pricing and dynamic portfolio decisions. Green and carbon-intensive returns used in the model are calibrated with low-frequency returns on stock prices between 2010 and 2021. We find that such a tax and subsidy scheme is a feasible and effective instrument in speeding up the transition to a greener economy, particularly in protracted periods of economic contraction. Our approach also brings a new perspective to the wealth inequality discussions.

Keywords: climate change; taxation; wealth; portfolio optimization (search for similar items in EconPapers)
JEL-codes: G11 H23 Q58 (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
https://doi.org/10.1515/jbnst-2024-0078 (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:jns:jbstat:v:245:y:2025:i:6:p:643-672:n:1004

DOI: 10.1515/jbnst-2024-0078

Access Statistics for this article

Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik) is currently edited by Peter Winker

More articles in Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik) from De Gruyter
Bibliographic data for series maintained by Peter Golla ().