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| Parry, Ian W.H.. |
| This paper provides simple formulas for adjusting the costs of carbon taxes and tradable carbon permits to account for interactions with preexisting tax distortions in the labor market. Both policies reduce labor supply as they increase product prices and reduce real household wages; the resulting efficiency losses in the labor market can be substantial relative to partial equilibrium abatement costs. However, much of this added cost can be offset-and perhaps more than offset when additional distortions from the tax system are considered-if revenues from carbon taxes or auctioned permits are used to reduce distortionary taxes. Consequently, there can be a strong case on efficiency grounds for using carbon taxes or auctioned permits over grandfathered... |
| Tipo: Working or Discussion Paper |
Palavras-chave: Carbon taxes; Carbon permits; Fiscal interactions; Revenue recycling; Environmental Economics and Policy; Q28; H21; H23. |
| Ano: 2003 |
URL: http://purl.umn.edu/10509 |
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| Parry, Ian W.H.. |
| This paper discusses how carbon abatement policies interact with the tax system, and how these interactions affect the overall costs of carbon controls. We provide formulas for adjusting cost estimates of auctioned and grandfathered carbon emissions from partial equilibrium energy models into rough estimates of general equilibrium costs that account for fiscal interactions. In the basic model with a tax on labor income, the general equilibrium costs of (revenue-neutral) auctioned permits are around 25% higher than the partial equilibrium costs; those of grandfathered permits, which do not directly raise revenues for recycling, are typically more than 100% higher. However, when allowance is made for complicating factors, such as the effect of tax subsidies... |
| Tipo: Working or Discussion Paper |
Palavras-chave: Carbon permits; Tax distortions; Revenue recycling; General equilibrium costs; Environmental Economics and Policy; Public Economics; Q28; H21. |
| Ano: 2002 |
URL: http://purl.umn.edu/10481 |
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