TY  - JOUR
AU  - Babiker,Mustafa H.
AU  - Metcalf,Gilbert E.
AU  - Reilly,John
TI  - Tax Distortions and Global Climate Policy
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 9136
PY  - 2002
Y2  - August 2002
UR  - http://www.nber.org/papers/w9136
L1  - http://www.nber.org/papers/w9136.pdf
N1  - Author contact info:
Mustafa Babiker
MIT
Joint Program on the Science and Policy of Global
Cambridge, MA  02139

Gilbert E. Metcalf
Room 3221
Department of the Treasury
Washington, DC 20220
1500 Pennsylvania Ave., NW
Tel: 202-622-0173
E-Mail: gilbert.metcalf@tufts.edu

John Reilly
Joint Program on the Science
and Policy of Global Change
Massachusetts Institute of Technology
1 Amherst St.  (Bldg. E40)
Cambridge, MA  02139
E-Mail: jreilly@mit.edu
AB  - We consider the efficiency implications of policies to reduce global carbon emissions in a world with pre-existing tax distortions. We first note that the weak double-dividend, the proposition that the welfare improvement from a tax reform where environmental taxes are used to lower distorting taxes must be greater than the welfare improvement from a reform where the environmental taxes are returned in a lump sum fashion, need not hold in a world with multiple distortions. We then present a large-scale computable general equilibrium model of the world economy with distortionary taxation. We use this model to evaluate a number of policies to reduce carbon emissions. We find that the weak double dividend is not obtained in a number of European countries. Results also demonstrate the point that the interplay between carbon policies and pre-existing taxes can differ markedly across countries. Thus one must be cautious in extrapolating the results from a country specific analysis to other countries.
ER  -