The fiscal implications of stringent climate policy

Richard Tol

Papers from arXiv.org

Abstract: Stringent climate policy compatible with the targets of the 2015 Paris Agreement would pose a substantial fiscal challenge. Reducing carbon dioxide emissions by 95% or more by 2050 would raise 7% (1-17%) of GDP in carbon tax revenue, half of current, global tax revenue. Revenues are relatively larger in poorer regions. Subsidies for carbon dioxide sequestration would amount to 6.6% (0.3-7.1%) of GDP. These numbers are conservative as they were estimated using models that assume first-best climate policy implementation and ignore the costs of raising revenue. The fiscal challenge rapidly shrinks if emission targets are relaxed.

Date: 2023-07
New Economics Papers: this item is included in nep-ene and nep-env
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Journal Article: The fiscal implications of stringent climate policy (2023)
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