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“Investments and public finance in a green, low carbon, economy”

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  • Carraro, Carlo
  • Favero, Alice
  • Massetti, Emanuele

Abstract

The paper evaluates the impacts on investments and public finance of a transition to a green, low carbon, economy induced by carbon taxation. Four global tax scenarios are examined using the integrated assessment model WITCH. Taxes are levied on all greenhouse gases (GHGs) and lead to global GHG concentrations equal to 680, 560, 500 and 460ppm CO2-eq in 2100. Investments in the power sector increase with respect to the Reference scenario only with the two highest taxes. Investments in energy-related R&D increase in all tax scenarios, but they are a small fraction of GDP. Investments in oil upstream decline in all scenarios. As a result, total investments decline with respect to the Reference scenario. Carbon tax revenues are high in absolute terms and as share of GDP. With high carbon taxes, tax revenues follow a “carbon Laffer” curve. The model assumes that tax revenues are flawlessly recycled lump-sum into the economy. In all scenarios, the power sector becomes a net recipient of subsidies to support the absorption of GHGs. In some regions, with high carbon taxes, subsidies to GHG removal are higher than tax revenues at the end of the century.

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  • Carraro, Carlo & Favero, Alice & Massetti, Emanuele, 2012. "“Investments and public finance in a green, low carbon, economy”," Energy Economics, Elsevier, vol. 34(S1), pages 15-28.
    • Handle: RePEc:eee:eneeco:v:34:y:2012:i:s1:p:s15-s28
    DOI: 10.1016/j.eneco.2012.08.036
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    References listed on IDEAS

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    3. Maria Chistyakova & Philippe Mahenc, 2015. "Free-Riding on Environmental Taxation," CEEES Paper Series CE3S-02/15, European University at St. Petersburg, Department of Economics.
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    7. Cardenas, J. C. & Jaramillo, F & León, D & López, M. & Rodríguez, M & Zuleta, H, 2021. "With a little help from my friends: Debt Renegotiation and Climate Change," Documentos de Trabajo 19732, Universidad del Rosario.
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    10. Robert Lisowski & Maciej Woźniak & Paweł Jastrzębski & Simeon Karafolas & Marek Matejun, 2021. "Determinants of Investments in Energy Sector in Poland," Energies, MDPI, vol. 14(15), pages 1-17, July.
    11. Xiangsheng Dou & Huanying Cui, 2017. "Low-carbon society creation and socio-economic structural transition in China," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 19(5), pages 1577-1599, October.
    12. Jiandong Chen & Ming Gao & Shulei Cheng & Yiyin Xu & Malin Song & Yu Liu & Wenxuan Hou & Shuhong Wang, 2022. "Evaluation and drivers of global low-carbon economies based on satellite data," Palgrave Communications, Palgrave Macmillan, vol. 9(1), pages 1-12, December.
    13. Chaturvedi, Vaibhav & Clarke, Leon & Edmonds, James & Calvin, Katherine & Kyle, Page, 2014. "Capital investment requirements for greenhouse gas emissions mitigation in power generation on near term to century time scales and global to regional spatial scales," Energy Economics, Elsevier, vol. 46(C), pages 267-278.
    14. Lee, Chien-Chiang & Wang, Chih-Wei & Thinh, Bui Tien & Xu, Zhi-Ting, 2022. "Climate risk and bank liquidity creation: International evidence," International Review of Financial Analysis, Elsevier, vol. 82(C).
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    More about this item

    Keywords

    Climate change mitigation; Carbon tax; Negative emissions;
    All these keywords.

    JEL classification:

    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
    • Q50 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - General
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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