Affiliation:
1. Department of Economics University of Ottawa, Ontario
Abstract
We use a general equilibrium framework to assess the impact of carbon mitigation policies in the presence of labour market rigidities. We analyze the impact of reducing CO2 emissions in a cap-and-trade system and the implications of different revenue-recycling options. Our results suggest that the policy has a negative impact on employment and welfare when permit revenues are recycled as lump-sum transfers to households. Using the carbon proceeds to reduce payroll tax achieves better outcomes, as the benefits outweigh the pure abatement cost. Moreover, using permit revenues to reduce payroll tax of low-skill workers alone represents the best option.
Publisher
University of Toronto Press Inc. (UTPress)
Subject
Public Administration,Sociology and Political Science
Cited by
17 articles.
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