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The fiscal implications of stringent climate policy

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  • Richard S. J. Tol

Abstract

Stringent climate policy compatible with the targets of the 2015 Paris Agreement would pose a substantial fiscal challenge. Reducing carbon dioxide emissions by 95% or more by 2050 would raise 7% (1-17%) of GDP in carbon tax revenue, half of current, global tax revenue. Revenues are relatively larger in poorer regions. Subsidies for carbon dioxide sequestration would amount to 6.6% (0.3-7.1%) of GDP. These numbers are conservative as they were estimated using models that assume first-best climate policy implementation and ignore the costs of raising revenue. The fiscal challenge rapidly shrinks if emission targets are relaxed.

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  • Richard S. J. Tol, 2023. "The fiscal implications of stringent climate policy," Papers 2307.16554, arXiv.org.
    • Handle: RePEc:arx:papers:2307.16554
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    References listed on IDEAS

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    1. Jan van Heerden & Reyer Gerlagh & James Blignaut & Mark Horridge & Sebastiaan Hess & Ramos Mabugu & Margaret Mabugu, 2006. "Searching for Triple Dividends in South Africa: Fighting CO2 Pollution and Poverty while Promoting Growth," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2), pages 113-142.
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    More about this item

    JEL classification:

    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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