Fostering Renewables and Recycling a Carbon Tax: Joint Aggregate and Intergenerational Redistributive Effects
AbstractA rising share of renewables in the energy mix pushes up the average price of energy - and so does a carbon tax. However the former bolsters the accumulation of capital whereas the latter, if fully recycled, does not. Thus, in general equilibrium, the effects on growth and intertemporal welfare of these two environmental policies differ. The present article assesses and compares these effects. It relies on a computable general equilibrium model with overlapping generations, an energy module and a public finance module. The main result is that an increasing share of renewables in the energy mix and a fully recycled carbon tax have opposite (though limited) impacts on activity and individuals’ intertemporal welfare in the long run. The recycling of a carbon tax fosters consumption and labour supply, and thus growth and welfare, whereas an increasing share of renewables does not. Results also suggest that a higher share of renewables and a recycled carbon tax trigger intergenerational redistributive effects, with the former being relatively detrimental for young generations and the latter being pro-youth. The policy implication is that a social planner seeking to modify the structure of the energy mix while achieving some neutrality as concerns the GDP and triggering some proyouth intergenerational equity, could usefully contemplate the joint implementation of higher quantitative targets for the future development of renewables and a carbon tax fully recycled through lower proportional taxes.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Chaire Economie du Climat in its series Working Papers with number 1408.
Length: 40 pages
Date of creation: 2014
Date of revision:
Energy transition; intergenerational redistribution; overlapping generations; carbon tax; general equilibrium;
Other versions of this item:
- Gonand, Frédéric, 2014. "Fostering Renewables and Recycling a Carbon Tax: Joint Aggregate and Intergenerational Redistributive Effects," Economics Papers from University Paris Dauphine, Paris Dauphine University 123456789/13361, Paris Dauphine University.
- D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
- D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
- E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
- L7 - Industrial Organization - - Industry Studies: Primary Products and Construction
- Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy
- Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
This paper has been announced in the following NEP Reports:
- NEP-ALL-2014-05-17 (All new papers)
- NEP-ENE-2014-05-17 (Energy Economics)
- NEP-ENV-2014-05-17 (Environmental Economics)
- NEP-MAC-2014-05-17 (Macroeconomics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Miles, David, 1999.
"Modelling the Impact of Demographic Change upon the Economy,"
Economic Journal, Royal Economic Society,
Royal Economic Society, vol. 109(452), pages 1-36, January.
- Miles, David K, 1997. "Modelling the Impact of Demographic Change Upon the Economy," CEPR Discussion Papers, C.E.P.R. Discussion Papers 1762, C.E.P.R. Discussion Papers.
- Michel Normandin & Pascal St-Amour, 1998.
"Substitution, risk aversion, taste shocks and equity premia,"
Journal of Applied Econometrics, John Wiley & Sons, Ltd.,
John Wiley & Sons, Ltd., vol. 13(3), pages 265-281.
- Normandin, M. & St-Amour, P., 1996. "Substitution, Risk Aversion, Taste Shocks and Equity Premia," Papers, Laval - Recherche en Politique Economique 9606, Laval - Recherche en Politique Economique.
- Michel Normandin & Pascal St-Amour, 1996. "Substitution, Risk Aversion, Taste Shocks and Equity Premia," Finance, EconWPA 9607001, EconWPA.
- Michel Normandin & Pascal St-Amour, 1996. "Substitution, Risk Aversion, Taste Shocks and Equity Premia," Cahiers de recherche CREFE / CREFE Working Papers, CREFE, UniversitÃ© du QuÃ©bec Ã MontrÃ©al 39, CREFE, Université du Québec à Montréal.
- Normandin, Michel & St-Amour, Pascal, 1996. "Substitution, Risk Aversion, Taste Shocks and Equity Premia," Cahiers de recherche, UniversitÃ© Laval - DÃ©partement d'Ã©conomique 9606, Université Laval - Département d'économique.
- Epstein, Larry G & Zin, Stanley E, 1991. "Substitution, Risk Aversion, and the Temporal Behavior of Consumption and Asset Returns: An Empirical Analysis," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 99(2), pages 263-86, April.
- Broer, D Peter & Westerhout, Ed W M T & Bovenberg, A Lans, 1994.
" Taxation, Pensions and Saving in a Small Open Economy,"
Scandinavian Journal of Economics, Wiley Blackwell,
Wiley Blackwell, vol. 96(3), pages 403-24.
- Broer, D.P. & Westerhout, E.W.M.T. & Bovenberg, A.L., 1994. "Taxation, pension and saving in a small open economy," Open Access publications from Tilburg University, Tilburg University urn:nbn:nl:ui:12-148754, Tilburg University.
- Axel Boersch-Supan & Florian Heiss & Alexander Ludwig & Joachim Winter, 2003.
"Pension Reform, Capital Markets and the Rate of Return,"
German Economic Review, Verein für Socialpolitik,
Verein für Socialpolitik, vol. 4(2), pages 151-181, 05.
- Börsch-Supan, Axel & Heiß, Florian & Winter, Joachim, 2000. "Pension reform, capital markets, and the rate of return," Discussion Papers, Institut fuer Volkswirtschaftslehre und Statistik, Abteilung fuer Volkswirtschaftslehre 589, Institut fuer Volkswirtschaftslehre und Statistik, Abteilung fuer Volkswirtschaftslehre.
- Florian Heiss & Alexander Ludwig & Joachim Winter, 2002. "Pension reform, capital markets, and the rate of return," MEA discussion paper series, Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy 02023, Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy.
- Börsch-Supan, Axel H. & Heiss, Florian & Ludwig, Alexander & Winter, Joachim, 2003. "Pension reform, capital markets and the rate of return," Munich Reprints in Economics, University of Munich, Department of Economics 20200, University of Munich, Department of Economics.
- Paul A. Samuelson, 1958. "An Exact Consumption-Loan Model of Interest with or without the Social Contrivance of Money," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 66, pages 467.
- John, A. & Pecchenino, R. & Schimmelpfennig, D. & Schreft, S., 1995. "Short-lived agents and the long-lived environment," Journal of Public Economics, Elsevier, Elsevier, vol. 58(1), pages 127-141, September.
- Grepperud, Sverre & Rasmussen, Ingeborg, 2004. "A general equilibrium assessment of rebound effects," Energy Economics, Elsevier, Elsevier, vol. 26(2), pages 261-282, March.
- Daron Acemoglu, 2002.
"Directed Technical Change,"
Review of Economic Studies,
Oxford University Press, vol. 69(4), pages 781-809.
- Brigitte Knopf, Ottmar Edenhofer, Christian Flachsland, Marcel T. J. Kok, Hermann Lotze-Campen, Gunnar Luderer, Alexander Popp, Detlef P. van Vuuren, 2010. "Managing the Low-Carbon Transition - From Model Results to Policies," The Energy Journal, International Association for Energy Economics, International Association for Energy Economics, vol. 0(Special I).
- Pearce, David W, 1991. "The Role of Carbon Taxes in Adjusting to Global Warming," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 101(407), pages 938-48, July.
- Oecd, 2006. "Projecting OECD Health and Long-Term Care Expenditures: What Are the Main Drivers?," OECD Economics Department Working Papers, OECD Publishing 477, OECD Publishing.
- Bovenberg, A. Lans & Heijdra, Ben J., 1998. "Environmental tax policy and intergenerational distribution," Journal of Public Economics, Elsevier, Elsevier, vol. 67(1), pages 1-24, January.
- Bohringer, Christoph & Rutherford, Thomas F., 1997. "Carbon Taxes with Exemptions in an Open Economy: A General Equilibrium Analysis of the German Tax Initiative," Journal of Environmental Economics and Management, Elsevier, vol. 32(2), pages 189-203, February.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Climate Economics Chair).
If references are entirely missing, you can add them using this form.