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Environmental Economics
Article . 2022 . Peer-reviewed
License: CC BY
Data sources: Crossref
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Environmental Economics
Article . 2022
Data sources: DOAJ
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The macroeconomic effects of climate policy: A Keynesian point of view

Authors: Piluso, Nicolas; Le Héron, E.;

The macroeconomic effects of climate policy: A Keynesian point of view

Abstract

The paper analyzes the effects of introducing a corporate carbon tax on GDP and the effectiveness of this macroeconomic policy. The study is based on constructing a simple Keynesian model with flexible prices. It shows that the carbon tax can have a double beneficial effect on the economy in addition to its favorable effect on the environment: i.e., an increase in GDP and employment. The initial values (y = 100; C = 60; I = 18; G = 16; g(A) = 6) was used to simulate a positive shock of the carbon tax T, increasing from 1.75 to 1.9. The paper considers three different cases depending on the low (Case 1), medium (Case 2), or high (Case 3) sensitivity of the marginal propensity to consume in response to an increase in the prices of goods. In addition, case 4 is considered: stimulus policy associated with climate policy; and case 5 is: policy to increase nominal wages. The results show that the carbon tax can lead to an increase in prices. Although the tax does not excessively negatively affect consumption, it has a positive effect on GDP via the increase in green investments and the induced increase in public spending. Households are, therefore, not necessarily penalized because they benefit from the multiplier effects of the increase in public spending due to the introduction of the ecological tax. Furthermore, stimulus policy is even more effective when combined with an emissions tax.

Country
France
Keywords

Employment, carbon tax, 330, 336, GDP, pollution, GE1-350, inflation, [SHS.ECO] Humanities and Social Sciences/Economics and Finance, model, [SHS.ECO]Humanities and Social Sciences/Economics and Finance, Pollution, Inflation, Environmental sciences, Carbon tax, employment, fiscal policy, Fiscal policy

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    This indicator reflects the "current" impact/attention (the "hype") of an article in the research community at large, based on the underlying citation network.
    Top 10%
    influence
    This indicator reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically).
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    impulse
    This indicator reflects the initial momentum of an article directly after its publication, based on the underlying citation network.
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citations
This is an alternative to the "Influence" indicator, which also reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically).
BIP!Citations provided by BIP!
popularity
This indicator reflects the "current" impact/attention (the "hype") of an article in the research community at large, based on the underlying citation network.
BIP!Popularity provided by BIP!
influence
This indicator reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically).
BIP!Influence provided by BIP!
impulse
This indicator reflects the initial momentum of an article directly after its publication, based on the underlying citation network.
BIP!Impulse provided by BIP!
7
Top 10%
Average
Top 10%
Green
gold