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Climate Change Mitigation Policies: Aggregate and Distributional Effects

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  • Cezar Santos
  • Tiago Cavalcanti
  • Zeina Hasna

Abstract

We evaluate the aggregate and distributional effects of climate change mitigation policies using a multi-sector equilibrium model with intersectoral inputoutput linkages and worker heterogeneity calibrated to different countries. The introduction of carbon taxes leads to changes in relative prices and inputs reallocation, including labor. For the United States, reaching its Paris Agreement pledge would imply at most a 0.6% drop in output. This impact is distributed asymmetrically across sectors and individuals.Workers with a comparative advantage in dirty energy sectors who do not reallocate bear relatively more of the cost but constitute a small fraction of the labor force.

Suggested Citation

  • Cezar Santos & Tiago Cavalcanti & Zeina Hasna, 2020. "Climate Change Mitigation Policies: Aggregate and Distributional Effects," Working Papers w202017, Banco de Portugal, Economics and Research Department.
  • Handle: RePEc:ptu:wpaper:w202017
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    More about this item

    JEL classification:

    • E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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