Existing estimates of optimal climate policy ignore the possibility that the revenues from a carbon tax could be used in a progressive way; as a result, these models imply that near-term climate action must come at some cost to the poor. Here the paper presented in this Research Seminar shows that this storyline reverses when progressive revenue recycling is taken into account. The authors find that an equal per capita refund of carbon tax revenues implies that a 2°C target can pay large and immediate dividends for improving wellbeing, reducing inequality, and alleviating poverty. In an optimal policy calculation (without a pre-specified temperature constraint) that weighs the benefits against the costs of mitigation, the recommended policy is characterized by aggressive near-term climate action followed by a slower climb towards full decarbonization; this pattern prevents runaway warming while also preserving tax revenues for redistribution. Their approach corrects a long-standing bias against strong immediate climate action.
Environmental, energy, and ecological problems have grown faster than their solutions. Economists have an important role to play to address these issues by using the latest science, rigorous methods and innovative policy solutions. The SWEEEP webinar series aims to convene the academic community to contribute to the scientific, economic, and policy discourses on important environmental and energy issues.
The seminar presentations are scheduled to last 60 minutes, with questions at the end.
The European Institute on Economics and the Environment is a partnership between Resources for the Future and Foundation CMCC. EIEE’s impartial economic and environmental research aims to facilitate the transition to a sustainable, inclusive society.
Contact: Professor Massimo Tavoni
The Energy Management research team at the Grenoble Ecole de Management (GEM) combines research on economics, strategic management, technology innovation and energy policy in order to create and share knowledge that will help society move towards a low-carbon future.
Contact: Professor Sébastien Houde
The ZEW – Leibniz Centre for European Economic Research is a leading German economic policy institute and a member of the Leibniz Association. ZEW's applied research aims to study and help design well-performing markets and institutions in Europe. In particular, it seeks to understand how to create a market framework that will enable the sustainable and efficient development of European economies.
Contact: Professor Sebastian Rausch
The Centre for Energy Policy and Economics (CEPE) was established in 1999 to complement the natural science and technical-oriented disciplines at ETH Zurich, by contributing to research and teaching in energy policy and economics. Through rigorous application of modern empirical methods, the goal of CEPE is to make critical contributions to the design and evaluation of energy and climate policy instruments.
Contact: Professor Massimo Filippini
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