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The Impact of a Carbon Tax on Economic Growth and Carbon Dioxide Emissions in Ireland

Author

Listed:
  • Thomas Conefrey

    (Economic and Social Research Institute (ESRI))

  • John FitzGerald

    (Economic and Social Research Institute (ESRI))

  • Laura Malaguzzi Valeri

    (Economic and Social Research Institute (ESRI))

  • Richard S. J. Tol

    (Economic and Social Research Institute (ESRI))

Abstract

This paper analyses the medium-term effects of a carbon tax on growth and CO2 emissions in Ireland, a small open economy. We find that a double dividend exists if the carbon tax revenue is recycled through reduced income taxes. If the revenue is recycled by giving a lump-sum transfer to households, a double dividend is unlikely. We also determine that a greater incidence of the carbon tax falls on capital than on labour. When combined with a decrease in income tax, there is a clear shift of the tax burden from labour to capital. Finally, most of the effect on the economy is due to changes in the competitiveness of the manufacturing and market services sectors. These results hold even if we allow changes in energy prices to have an enhanced (detrimental) effect on Ireland's competitiveness.

Suggested Citation

  • Thomas Conefrey & John FitzGerald & Laura Malaguzzi Valeri & Richard S. J. Tol, 2008. "The Impact of a Carbon Tax on Economic Growth and Carbon Dioxide Emissions in Ireland," Papers WP251, Economic and Social Research Institute (ESRI).
  • Handle: RePEc:esr:wpaper:wp251
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    More about this item

    Keywords

    carbon tax; Ireland; double dividend; tax incidence;
    All these keywords.

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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