Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/233873
Authors: 
Abrell, Jan
Kosch, Mirjam
Rausch, Sebastian
Year of Publication: 
2021
Series/Report no.: 
ZEW Discussion Papers No. 21-039
Abstract: 
While carbon taxes are generally seen as a rational policy response to climate change, knowledge about their performance from an expost perspective is still limited. This paper analyzes the emissions and cost impacts of the UK CPS, a carbon tax levied on all fossil-fired power plants. To overcome the problem of a missing control group, we propose a policy evaluation approach which leverages economic theory and machine learning for counterfactual prediction. Our results indicate that in the period 2013-2016 the CPS lowered emissions by 6.2 percent at an average cost of €18 per ton. We find substantial temporal heterogeneity in tax-induced impacts which stems from variation in relative fuel prices. An important implication for climate policy is that in the short run a higher carbon tax does not necessarily lead to higher emissions reductions or higher costs.
JEL: 
C54
Q48
Q52
Q58
L94
Document Type: 
Working Paper

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