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

Author Info

  • 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.

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File URL: http://www.esri.ie/UserFiles/publications/20080821092420/WP251.pdf
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Paper provided by Economic and Social Research Institute (ESRI) in its series Papers with number WP251.

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Length: 43 pages
Date of creation: Aug 2008
Date of revision:
Handle: RePEc:esr:wpaper:wp251
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Keywords: carbon tax; Ireland; double dividend; tax incidence;

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Find related papers by 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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Cited by:

  1. Nanthakumar, Loganathan & Shahbaz, Muhammad & Taha, Roshaiza, 2014. "The Effect of Green Taxation and Economic Growth on Environment Hazards: The Case of Malaysia," MPRA Paper 56843, University Library of Munich, Germany, revised 23 Jun 2014.
  2. Legge, Thomas & Scott, Susan, 2009. "Policy Options to Reduce Ireland's GHG Emissions [Instrument choice: the pros and cons of alternative policy instruments]," Papers WP284, Economic and Social Research Institute (ESRI).
  3. di Cosmo, Valeria & Hyland, Marie, 2013. "Carbon Tax Scenarios and their Effects on the Irish Energy Sector," Papers RB2013/2/7, Economic and Social Research Institute (ESRI).
  4. FitzGerald, John, 2011. "The Irish Economy Today: Albatross or Phoenix?," Papers WP384, Economic and Social Research Institute (ESRI).
  5. Curtis, John & Devitt, Niamh & di Cosmo, Valeria & Farrell, Niall & FitzGerald, John & Hyland, Marie & Lynch, Muireann & Lyons, Sean & McCoy, Daire & Malaguzzi Valeri, Laura & Walsh, Darragh, 2014. "Irish Energy Policy: An Analysis of Current Issues," Research Series, Economic and Social Research Institute (ESRI), number rs37 edited by FitzGerald, John & Malaguzzi Valeri, Laura.
  6. Curtis, John & di Cosmo, Valeria & Deane, Paul, 2014. "Climate Policy, Interconnection and Carbon Leakage: The Effect of Unilateral UK Policy on Electricity and GHG Emissions in Ireland," Papers RB2014/1/7, Economic and Social Research Institute (ESRI).
  7. Callan, Tim & Lyons, Sean & Scott, Susan & Tol, Richard S.J. & Verde, Stefano, 2009. "The distributional implications of a carbon tax in Ireland," Energy Policy, Elsevier, vol. 37(2), pages 407-412, February.
  8. FitzGerald, John & Kearney, Ide & Bergin, Adele & Conefrey, Thomas & Duffy, David & Timoney, Kevin & Znuderl, Nusa, 2013. "Medium-Term Review: 2013-2020, No. 12," Forecasting Report, Economic and Social Research Institute (ESRI), number MTR12, March.
  9. Loganathan, Nanthakumar & Shahbaz, Muhammad & Taha, Roshaiza, 2014. "The link between green taxation and economic growth on CO2 emissions: Fresh evidence from Malaysia," Renewable and Sustainable Energy Reviews, Elsevier, vol. 38(C), pages 1083-1091.
  10. Keane, Claire & Walsh, John R. & Callan, Tim & Savage, Michael, 2012. "Property Tax in Ireland: Key Choices," Papers EC11, Economic and Social Research Institute (ESRI).
  11. Legge, Thomas & Scott, Susan, 2009. "Policy Options to Reduce Ireland's Greenhouse Gas Emissions," Research Series, Economic and Social Research Institute (ESRI), number RS9.

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