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

  • 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))

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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  4. Richard S. J. Tol & Tim Callan & Thomas Conefrey & John FitzGerald & Seán Lyons & Laura Malaguzzi Valeri & Susan Scott, 2008. "A Carbon Tax for Ireland," Papers WP246, Economic and Social Research Institute (ESRI).
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