Carbon Tax and Tourism Employment: Is There An Interplay?

Abstract

The impact of the climate change response on the labour market is an important question for policymakers, while the net positive effect of green policies on the labour market is seen as one of the arguments in favour of a green transition. This is particularly important for the tourism labour market, which was severely hit by the COVID-19 pandemic. This study examined the effect of carbon taxes on tourism employment for European countries that have levied a carbon tax over the past thirty years. A macroeconomic panel data regression model ex-post study was applied by contrasting the obtained results via a robustness check. The estimation results indicate a slightly positive and significant association between the carbon tax and tourism employment, which was additionally tested by considering revenue recycling, early adopters of the carbon tax, and a higher carbon tax compared to countries with a lower carbon tax. We cannot conclude that these factors matter for tourism employment, proving the robustness of the results. Revenue-neutral carbon taxation, policies to address the skills gap, push and pull incentives, and active labour market policies to facilitate the quick re-integration of jobseekers into employment are viewed as pivotal to ensure a smoother transition toward a sustainable tourism labour market.