Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/310342 
Year of Publication: 
2024
Series/Report no.: 
NBB Working Paper No. 460
Publisher: 
National Bank of Belgium, Brussels
Abstract: 
To identify the households most affected by a carbon tax I set up a multi-sector model with putty-clay technology. A $100-per-ton carbon tax cuts emissions by 25% after 5 years, but reduces output by 3% in the short run and 4% in the long run. Initially, the tax is progressive despite poorer households spending more on carbon-intensive goods, the prices of which rise. The complementarity of capital and energy causes a sharp decline in capital income, affecting top earners the most, and leads to job cuts in capital goods-producing industries that employ high-income earners. Over time the tax incidence flattens.
Subjects: 
carbon tax
putty-clay
input-output linkages
income distribution
JEL: 
D57
E62
Q52
Document Type: 
Working Paper

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