Webinars in Economics of Environment, Energy and Transports
At 4pm on Zoom and has a duration of 60 minutes, with questions at the end.
In order to attend the webinar, registration is mandatory. Please use the following link to access the registration form.
Thomas Douenne (University of Amsterdam)
Optimal Fiscal Policy in a Climate-Economy Model with Heterogeneous Households
Abstract
We study optimal fiscal policy to address climate change and inequality. We theoretically characterize optimal carbon and income taxes, and quantify them for the U.S. economy with the climate model calibrated to DICE. In contrast to the representative-agent setting, we find that (i) the optimal carbon tax is on average equal to the Pigouvian level, and hardly ever deviates from it; (ii) inequality reduces the Pigouvian level, by 4% in our baseline calibration; (iii) the revenue from carbon taxes is optimally split halfway between reducing tax distortions and increasing transfers. Introducing optimal carbon taxation has progressive welfare effects and low-income households benefit even in the short run.