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The economic and environmental impact of a carbon tax for Scotland: A computable general equilibrium analysis

  • Allan, Grant
  • Lecca, Patrizio
  • McGregor, Peter
  • Swales, Kim

Using a disaggregated energy–economy–environmental model, we investigate the economic and environmental impact of a Scottish specific carbon tax under three alternative assumptions about the use of the revenue raised by the tax: revenues raised are not recycled within Scotland; revenues are used to increase general government expenditure or to reduce Scottish income tax. We find that by imposing a tax of £50 per tonne of CO2 the 37% CO2 reduction target is met with a very rapid adjustment in all three cases if the model incorporates forward-looking behaviour. However, the adjustment is much slower if agents are myopic. In addition, the results of the model suggest that a carbon tax might simultaneously stimulate economic activity whilst reducing emissions and thus secure a double dividend, but only for the case in which the revenue is recycled through income tax.

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Article provided by Elsevier in its journal Ecological Economics.

Volume (Year): 100 (2014)
Issue (Month): C ()
Pages: 40-50

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Handle: RePEc:eee:ecolec:v:100:y:2014:i:c:p:40-50
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