Economy-wide and CO2 impacts of carbon taxes and output-based pricing in New Brunswick, Canada

Patrick Withey, Chinmay Sharma, Van Lantz, Galen McMonagle, Thomas O. Ochuodho

Research output: Contribution to journalArticlepeer-review

5 Scopus citations

Abstract

Economic models suggest that greenhouse gas emission reductions are warranted on a global scale. However, more analysis is needed at a regional level to inform local governments about the economics of alternative carbon policies. To this end, we develop a dynamic computable general equilibrium model for the case-study province of New Brunswick, Canada, and consider economic impacts and costs of two carbon policy scenarios. The first, called the Federal ‘backstop’, consists of a carbon tax on small emitters and an output-based pricing system (OBPS) on large emitters. The second consists of a common carbon tax across all emitters. We also consider different carbon tax revenue recycling options under each scenario. Results show that when a carbon tax is applied to all emitters starting at $20/tonne in 2019 and increasing to $170/tonne in 2030, cumulative present value GDP would decline in the range of 0.60%–0.63% (depending on revenue recycling options), and emissions will decline by more than 32%. Under the Federal backstop scenario, GDP reduction is only 0.24–0.26%, and emissions reduction is only 13%. In all scenarios, the costs range between $21 and 50/tonne on average, and are generally lower than the global social cost of carbon estimated in other research.

Original languageEnglish
Pages (from-to)2998-3015
Number of pages18
JournalApplied Economics
Volume54
Issue number26
DOIs
StatePublished - 2022

Bibliographical note

Publisher Copyright:
© 2021 Informa UK Limited, trading as Taylor & Francis Group.

Keywords

  • CGE model
  • Climate change
  • carbon tax
  • economic impacts

ASJC Scopus subject areas

  • Economics and Econometrics

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