An investigation of carbon taxes and terms-of-trade in a large macroeconometric mode

Pub. Date
30 December, 2021
carbon tax

Raising the carbon price by $50 per tonne of CO2 would more than double the post-tax price of coal relative to renewable energy. This is an important figure to face, when considering that carbon taxes are likely to play a key role in meeting greenhouse gas emission targets that are consistent with the Paris Agreement. In this paper we assess the macroeconomic effects of a carbon tax on the global economy, paying particular attention to the terms-of-trade implications for importers and exporters of fossil fuels.