Measuring the Macroeconomic Impact of Carbon Taxes

Abstract

Policymakers often express concern about the impact of carbon taxes on employment or GDP. Using a new dataset on carbon tax rates, we estimate the macroeconomic impacts of these taxes on GDP and employment growth rates for various specifications and samples. Our point estimates suggest a zero to modest positive impact on GDP and total employment growth rates. More importantly, we find no robust evidence of a negative effect of the tax on employment or GDP growth. For the European experience at least, we find no support for the view that carbon taxes are job or growth killers.