Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/179449
Authors: 
Rausch, Sebastian
Yonezawa, Hidemichi
Year of Publication: 
2018
Series/Report no.: 
Economics Working Paper Series 18/287
Abstract: 
We examine the lifetime incidence and intergenerational distributional effects of an economywide carbon tax swap using a numerical dynamic general equilibrium model with overlapping generations of the U.S. economy. We highlight various fundamental choices in policy design including (1) the level of the initial carbon tax, (2) the growth rate of the carbon tax trajectory of over time, and (3) alternative ways for revenue recycling. Without revenue recycling, we find that generations born before the tax is introduced experience smaller welfare losses, or even gain, relative to future generations. For sufficiently low growth rates of the tax trajectory, the impacts for distant future generations decrease over time. For future generations born after the introduction of the tax, the negative welfare impacts are the smallest (largest) when revenues are recycled through lowering pre-existing capital income taxes (through per-capita lump-sum rebates). For generations born before the tax is introduced, we find that lump-sum rebates favor very old generations and labor (capital) income tax recycling favors very young generations (generations of intermediate age).
Subjects: 
Carbon tax
Green Tax Reform
Intergenerational Incidence
Distributional Impacts
Overlapping Generations
Climate Policy
JEL: 
H23
Q52
D91
Q43
C68
Persistent Identifier of the first edition: 
Document Type: 
Working Paper
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