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Will the Centralisation of Carbon Pricing Revenue in the EU Lead to Laxer Climate Policy?

Author

Listed:
  • Clemens Fuest
  • Volker Meier

Abstract

We analyse the economic impact of using carbon pricing revenue to fund the EU budget. Such a reform would redistribute from countries with above average carbon intensive production to less carbon intensive countries. Once the reform is implemented, the low carbon countries will prefer a lower carbon price, i.e. laxer climate policy at the EU level, than before the reform. For high carbon countries the opposite is true. As a result, EU climate policy becomes less ambitious and less disputed. We also analyse an extension of the model in which consumption generates carbon emissions that are not covered by the emission certificate regulation, and we consider the impact of changes in EU climate policy on the rest of the world as well as global emissions.

Suggested Citation

  • Clemens Fuest & Volker Meier, 2021. "Will the Centralisation of Carbon Pricing Revenue in the EU Lead to Laxer Climate Policy?," CESifo Working Paper Series 8979, CESifo.
    • Handle: RePEc:ces:ceswps:_8979
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    File URL: https://www.cesifo.org/DocDL/cesifo1_wp8979.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    climate change; global externalities; EU finances; political economy;
    All these keywords.

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • H27 - Public Economics - - Taxation, Subsidies, and Revenue - - - Other Sources of Revenue
    • H87 - Public Economics - - Miscellaneous Issues - - - International Fiscal Issues; International Public Goods
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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