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Carbon Revenue Recycling - Opportunities and Challenges

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  • Elena Simonova

    ()
    (Certified General Accountants Association of Canada)

  • Rock Lefebvre

    ()
    (Certified General Accountants Association of Canada)

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    Abstract

    Environmental policy instruments that generate budget revenues may become an increasingly attractive policy option for Canada's federal government due to amplified fiscal pressures. If that is the case, revenue recycling is an essential element of pricing carbon. This paper present a brief overview of benefits of recycling carbon revenues and the challenges that may be encountered when choosing a specific option for revenue recycling. The analysis shows that the existing research leaves the open-ended question of which taxes should be used for revenue recycling unanswered; particularly in the Canadian context. Given this, the economic efficiency of different types of taxes could be used as a source of general guidance for revenue recycling. However, significant doubt exists that there is sufficient political will to recycle carbon revenue. Over the past two decades, the tax composition of the federal revenue continued shifting towards a higher reliance on economically distortive taxes instead of increasing use of more efficient taxes.

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    File URL: http://ideas.cga-canada.org/WorkingPapers/090904.pdf
    File Function: First version, 2009
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    Bibliographic Info

    Paper provided by Certified General Accountants Association of Canada in its series Working Papers with number 090904.

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    Length: 16 pages
    Date of creation: Sep 2009
    Date of revision:
    Handle: RePEc:cga:wpaper:090904

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    Related research

    Keywords: carbon emission reduction; carbon revenue recycling; double dividend; carbon pricing;

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    1. Mustafa H. Babiker & Gilbert E. Metcalf & John Reilly, 2002. "Tax Distortions and Global Climate Policy," NBER Working Papers 9136, National Bureau of Economic Research, Inc.
    2. Parry, Ian W. H. & Bento, Antonio M., 2000. "Tax Deductions, Environmental Policy, and the "Double Dividend" Hypothesis," Journal of Environmental Economics and Management, Elsevier, vol. 39(1), pages 67-96, January.
    3. Bento, Antonio M. & Jacobsen, Mark, 2007. "Ricardian rents, environmental policy and the `double-dividend' hypothesis," Journal of Environmental Economics and Management, Elsevier, vol. 53(1), pages 17-31, January.
    4. Brian Murray & Andrew Keeler & Walter Thurman, 2005. "Tax Interaction Effects, Environmental Regulation, and “Rule of Thumb” Adjustments to Social Cost," Environmental & Resource Economics, European Association of Environmental and Resource Economists, European Association of Environmental and Resource Economists, vol. 30(1), pages 73-92, January.
    5. McKitrick, R, 1996. "Double Dividended Environmental Taxation and Canadian Carbon Emissions Control," Working Papers, University of Guelph, Department of Economics and Finance 1996-10, University of Guelph, Department of Economics and Finance.
    6. Edwards, T. Huw. & Hutton, John P., 2001. "Allocation of carbon permits within a country: a general equilibrium analysis of the United Kingdom," Energy Economics, Elsevier, Elsevier, vol. 23(4), pages 371-386, July.
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