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Environmental Economics - Should a carbon tax vary over the economic cycle?

Geoff Riley

22nd August 2021

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Should a carbon tax vary according to the stage of the economic cycle?

Would such a strategy help to mitigate some of the risks of emissions reductions on jobs and real incomes during tough economic times?

This is the main argument of research presented in this VoxEU paper.

Economists Ghassane Benmir, Ivan Jaccard and Gauthier Vermandel make the case that the optimal carbon tax should vary substantially over the economic cycle.

It is the sort of argument that would classify as excellent evaluation when discussing some of the potential trade-offs between policies - in this case, between environmental policies and their short-term macroeconomic impact.

#Climate #policies have implications for the short & medium term.
A time-varying #carbon# tax that is increased during booms & decreased during recessions, might alleviate #economic impact
G Benmir @LSEEcon, I Jaccard @ecb, @gVermandel @Paris_Dauphine https://t.co/dlogE6chRY pic.twitter.com/oP4MSCvwvP
— VoxEU (@voxeu) August 21, 2021

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Geoff Riley

Geoff Riley FRSA has been teaching Economics for nearly forty years. He has over twenty years experience as Head of Economics at leading schools. He writes extensively and is a contributor and presenter on CPD and Revision conferences in the UK and overseas.

@tutor2uGeoff

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Environmental Economics - Should a carbon tax vary over the economic cycle?

Geoff Riley

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