Assessing the socio-economic impacts of different ways to recycle revenues from carbon pricing
Résumé
The low-carbon transition is expected to generate large socio-economic implications across regions and sectors, but the revenues collected from a carbon tax can be used to alleviate the potentially adverse societal impacts of decarbonization. Here, we use four leading macroeconomic models with high regional and sectoral disaggregation to assess the potential economic and structural changes of decarbonisation and how these are affected by the use of carbon revenues. We show that the absolute GDP and employment impacts differ depending on economic narrative behind each model, and we derive conclusions that are robust across modelling paradigms. Using carbon revenues to reduce labor taxes alleviates 30%-70%of mitigation costs in CGE models, while directing them to households through lump-sum payments has limited GDP impacts but with a positive trade-off for equity and, therefore, constrain the potential to avoid unfair burden sharing within countries.
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