Cost distribution and equity of climate policy in Switzerland

Florian Landis ()
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Florian Landis: ETH Zürich, ZUE E3

Swiss Journal of Economics and Statistics, 2019, vol. 155, issue 1, 1-28

Abstract: Abstract Swiss targets for climate policy require significant reductions of emissions by 2050. While such reductions can be achieved in a cost-efficient manner by employing taxes on greenhouse gas emissions, such taxes tend to lead to a regressive distribution of policy cost among households. To counteract such a regressive outcome, tax revenue may be recycled in a progressive way. This paper uses a computable general equilibrium model coupled with a microsimulation of household income and expenditure to examine the policy cost of different carbon tax policies and their distribution across households. I find that in the absence of revenue recycling, emission taxation leads to a regressive distribution of policy cost. I analyze different revenue recycling schemes (per-capita lump-sum transfers, reductions in labor taxation, and reductions in VAT taxation of necessary commodities) and their ability to avoid regressive outcomes.

Keywords: Cost-effectiveness; Computable general equilibrium; Microsimulation; Climate policy; Distributional impacts (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (6)

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DOI: 10.1186/s41937-019-0038-2

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