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Cost distribution and equity of climate policy in Switzerland

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  • Florian Landis

    (ETH Zürich, ZUE E3)

Abstract

Swiss targets for climate policy require significant reductions of emissions by 2050. While such reductions can be achieved in a cost-efficient manner by employing taxes on greenhouse gas emissions, such taxes tend to lead to a regressive distribution of policy cost among households. To counteract such a regressive outcome, tax revenue may be recycled in a progressive way. This paper uses a computable general equilibrium model coupled with a microsimulation of household income and expenditure to examine the policy cost of different carbon tax policies and their distribution across households. I find that in the absence of revenue recycling, emission taxation leads to a regressive distribution of policy cost. I analyze different revenue recycling schemes (per-capita lump-sum transfers, reductions in labor taxation, and reductions in VAT taxation of necessary commodities) and their ability to avoid regressive outcomes.

Suggested Citation

  • Florian Landis, 2019. "Cost distribution and equity of climate policy in Switzerland," Swiss Journal of Economics and Statistics, Springer;Swiss Society of Economics and Statistics, vol. 155(1), pages 1-28, December.
  • Handle: RePEc:spr:sjecst:v:155:y:2019:i:1:d:10.1186_s41937-019-0038-2
    DOI: 10.1186/s41937-019-0038-2
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    Cited by:

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