The economic and environmental impact of a carbon tax for Scotland : a computable general equilibrium analysis

Allan, Grant and Lecca, Patrizio and McGregor, Peter and Swales, Kim (2014) The economic and environmental impact of a carbon tax for Scotland : a computable general equilibrium analysis. Ecological Economics, 100. pp. 40-50. ISSN 0921-8009

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    Abstract

    Using a disaggregated energy–economy–environmental model, we investigate the economic and environmental impact of a Scottish specific carbon tax under three alternative assumptions about the use of the revenue raised by the tax: revenues raised are not recycled within Scotland; revenues are used to increase general government expenditure or to reduce Scottish income tax. Wefind that by imposing a tax of £50 per tonne of CO2 the 37% CO2 reduction target is met with a very rapid adjustment in all three cases if the model incorporates forward-looking behaviour. However, the adjustment is much slower if agents are myopic. In addition, the results of the model suggest that a carbon tax might simultaneously stimulate economic activity whilst reducing emissions and thus secure a double dividend, but only for the case in which the revenue is recycled through income tax.