Environmental Fiscal Reform and Fiscal Consolidation: The Quest for the Third Dividend in Portugal
AbstractThis paper explores the capacity for environmental fiscal 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 stimulate 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: 36 pages
Date of creation: 01 Jun 2013
Date of revision:
Carbon Tax; Environmental Fiscal Reform; Endogenous Growth; Budgetary Consolidation.;
Find related papers by JEL classification:
- D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
- 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
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.:
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For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Daifeng He) or (Alfredo Pereira).
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