Recycling carbon tax revenues in Spain. Environmental and economic assessment of selected green reforms
Angel Estrada () and
No 2119, Working Papers from Banco de España
The design of the key elements of a public budget-neutral environmental fiscal reform could have very different implications in terms of its environmental and macroeconomic impact. Our proposals rely on a carbon tax on fossil fuels covering all economic sectors. It would be a powerful and efficient instrument for reducing emissions, as it gives economic agents an incentive to find ways to save energy and switch to greener energy sources while generating significant tax revenues whose judicious use may have positive macroeconomic effects. In addition, a carbon tax is easy to administer since it can be integrated into existing fuel excise duties. We build a novel model to assess the environmental and economic impact of a set of environmental fiscal reforms in Spain which are defined by different levels of the carbon tax, the possibility of a border carbon adjustment and alternative uses of the tax revenues generated. In this framework, we incorporate technological innovation, which will allow firms to produce with non-polluting inputs and, specifically, the electricity sector, to increase the role of renewables in its generation mix. The results indicate that carbon tax designs with border carbon adjustment tend to be more effective in lowering emissions in Spain. They also suggest that an appropriately designed environmental fiscal reform may even boost economic activity in the medium term if the revenues are used to reduce other, more distorting taxes.
Keywords: carbon tax; environmental policy; modelling; green tax reform (search for similar items in EconPapers)
JEL-codes: C6 H2 Q5 (search for similar items in EconPapers)
Pages: 39 pages
New Economics Papers: this item is included in nep-ene, nep-env, nep-pub and nep-res
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
https://www.bde.es/f/webbde/SES/Secciones/Publicac ... 21/Files/dt2119e.pdf First version, May 2021 (application/pdf)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:bde:wpaper:2119
Access Statistics for this paper
More papers in Working Papers from Banco de España Contact information at EDIRC.
Bibliographic data for series maintained by María Beiro. Electronic Dissemination of Information Unit. Research Department. Banco de España ().