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The Impact of a Carbon Tax on Economic Growth and Carbon Dioxide Emissions in Ireland

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Author Info

  • Thomas Conefrey

    (Economic and Social Research Institute (ESRI))

  • John FitzGerald

    (Economic and Social Research Institute (ESRI))

  • Laura Malaguzzi Valeri

    (Economic and Social Research Institute (ESRI))

  • Richard S. J. Tol

    (Economic and Social Research Institute (ESRI))

Abstract

This paper analyses the medium-term effects of a carbon tax on growth and CO2 emissions in Ireland, a small open economy. We find that a double dividend exists if the carbon tax revenue is recycled through reduced income taxes. If the revenue is recycled by giving a lump-sum transfer to households, a double dividend is unlikely. We also determine that a greater incidence of the carbon tax falls on capital than on labour. When combined with a decrease in income tax, there is a clear shift of the tax burden from labour to capital. Finally, most of the effect on the economy is due to changes in the competitiveness of the manufacturing and market services sectors. These results hold even if we allow changes in energy prices to have an enhanced (detrimental) effect on Ireland's competitiveness.

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File URL: http://www.esri.ie/UserFiles/publications/20080821092420/WP251.pdf
File Function: First version, 2008
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Bibliographic Info

Paper provided by Economic and Social Research Institute (ESRI) in its series Papers with number WP251.

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Length: 43 pages
Date of creation: Aug 2008
Date of revision:
Handle: RePEc:esr:wpaper:wp251

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Keywords: carbon tax; Ireland; double dividend; tax incidence;

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References

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  1. Richard S. J. Tol & Tim Callan & Thomas Conefrey & John FitzGerald & Seán Lyons & Laura Malaguzzi Valeri & Susan Scott, 2008. "A Carbon Tax for Ireland," Papers WP246, Economic and Social Research Institute (ESRI).
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Citations

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Cited by:
  1. Legge, Thomas & Scott, Susan, 2009. "Policy Options to Reduce Ireland's Greenhouse Gas Emissions," Research Series, Economic and Social Research Institute (ESRI), number RS9.
  2. Legge, Thomas & Scott, Susan, 2009. "Policy Options to Reduce Ireland's GHG Emissions [Instrument choice: the pros and cons of alternative policy instruments]," Papers WP284, Economic and Social Research Institute (ESRI).
  3. Tim Callan & Sean Lyons & Sue Scott & Richard S. J. Tol & Stefano Verde, 2008. "The Distributional Implications of a Carbon Tax in Ireland," Papers WP250, Economic and Social Research Institute (ESRI).
  4. FitzGerald, John, 2011. "The Irish Economy Today: Albatross or Phoenix?," Papers WP384, Economic and Social Research Institute (ESRI).
  5. Keane, Claire & Walsh, John R. & Callan, Tim & Savage, Michael, 2012. "Property Tax in Ireland: Key Choices," Papers EC11, Economic and Social Research Institute (ESRI).
  6. Di Cosmo, Valeria & Hyland, Marie, 2011. "Carbon Tax Scenarios and their Effects on the Irish Energy Sector," Papers WP407, Economic and Social Research Institute (ESRI).

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