Environmental Fiscal Reform and Fiscal Consolidation: The Quest for the Third Dividend in Portugal
AbstractThis paper explores the capacity for environmental reform to reduce CO2 emissions, stimulate economic performance, and promote fiscal sustainability. Simulation results suggest that reforms based on CO2 taxation stimulate GDP when tax revenues are used to promote private or public investment and employment when used to finance reductions in personal income taxation or firms' social security contributions. More generally, reforms allow for reductions in the costs of climate policy, a weaker realization of the second dividend. In addition, several reforms lead to reductions in public debt, the realization of a third dividend. When political constraints on reducing public spending are considered, however, this third dividend only materializes when revenues finance public investment or reductions in the firms' social security contributions. Overall, our results suggest that low growth and high public debt need not be regarded as hindrances for environmental fiscal reform but can actually be seen as catalysts.
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Bibliographic InfoPaper provided by Department of Economics, College of William and Mary in its series Working Papers with number 114.
Length: 49 pages
Date of creation: 20 Apr 2011
Date of revision:
Carbon Tax; Environmental Fiscal Reform; Economic Growth; Budgetary Consolidation; Dynamic General Equilibrium; Endogenous Growth;
Find related papers by JEL classification:
- D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
- H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
- H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt
- O44 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Environment and Growth
- Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
- Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-04-30 (All new papers)
- NEP-CMP-2011-04-30 (Computational Economics)
- NEP-DGE-2011-04-30 (Dynamic General Equilibrium)
- NEP-ENE-2011-04-30 (Energy Economics)
- NEP-ENV-2011-04-30 (Environmental Economics)
- NEP-PBE-2011-04-30 (Public Economics)
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.:
- Gilbert Metcalf & David Weisbach, 2008.
"The Design of a Carbon Tax,"
Discussion Papers Series, Department of Economics, Tufts University
0727, Department of Economics, Tufts University.
- Gilbert Metcalf & David Weisbach, 2008. "The Design of a Carbon Tax," Discussion Papers Series, Department of Economics, Tufts University 0728, Department of Economics, Tufts University.
- Metcalf, Gilbert & Weisbach, David, 2009. "The Design of a Carbon Tax," Working paper 142, Regulation2point0.
- Carlo Carraro & Enrica De Cian & Massimo Tavoni, 2009.
"Human Capital Formation and Global Warming Mitigation: Evidence from an Integrated Assessment Model,"
CESifo Working Paper Series
2874, CESifo Group Munich.
- Carlo Carraro & Enrica De Cian & Massimo Tavoni, 2009. "Human capital formation and global warming mitigation: evidence from an integrated assessment model," Working Papers 2009_30, Department of Economics, University of Venice "Ca' Foscari".
- Alfredo Marvão Pereira & Rui M. Pereira, 2011. "On the Economic and Budgetary Impact of Fiscal Devaluation in Portugal," Working Papers 116, Department of Economics, College of William and Mary.
- Alfredo Marvão Pereira & Rui M. Pereira, 2012. "DGEP - A Dynamic General Equilibrium Model of the Portuguese Economy: Model Documentation," Working Papers 127, Department of Economics, College of William and Mary.
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