IDEAS home Printed from https://ideas.repec.org/a/cup/nierev/v258y2021ip47-65_5.html
   My bibliography  Save this article

An Investigation Of Carbon Taxes And Terms Of Trade In A Large Macroeconometric Model

Author

Listed:
  • Holland, Dawn
  • Hurst, Ian
  • Kara, Amit
  • Liadze, Iana

Abstract

Carbon taxes are likely to play a key role in meeting greenhouse gas emission targets that are consistent with the Paris Agreement. In this article, we assess the macroeconomic effects of a carbon tax on the global economy, paying particular attention to the terms-of-trade implications for importers and exporters of fossil fuels. We use a modified version of the National Institute’s Global Econometric Model, NiGEM. In the stylized scenarios, all countries and regions impose a permanent and uniform carbon tax immediately. Our simulations show that demand for fossil fuels falls substantially in response to the tax, global (pre-tax) prices of fossil fuels decline, and the tax can raise substantial revenue for the government. The overall impact on GDP growth and inflation in each country depends on the fossil fuel intensity of output, the net losses/gains in terms of trade and the macroeconomic policy reaction.

Suggested Citation

  • Holland, Dawn & Hurst, Ian & Kara, Amit & Liadze, Iana, 2021. "An Investigation Of Carbon Taxes And Terms Of Trade In A Large Macroeconometric Model," National Institute Economic Review, National Institute of Economic and Social Research, vol. 258, pages 47-65, November.
  • Handle: RePEc:cup:nierev:v:258:y:2021:i::p:47-65_5
    as

    Download full text from publisher

    File URL: https://www.cambridge.org/core/product/identifier/S0027950121000387/type/journal_article
    File Function: link to article abstract page
    Download Restriction: no
    ---><---

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cup:nierev:v:258:y:2021:i::p:47-65_5. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Kirk Stebbing (email available below). General contact details of provider: https://edirc.repec.org/data/niesruk.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.