Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/324545 
Year of Publication: 
2021
Citation: 
[Journal:] Central European Economic Journal (CEEJ) [ISSN:] 2543-6821 [Volume:] 8 [Issue:] 55 [Year:] 2021 [Pages:] 231-245
Publisher: 
Sciendo, Warsaw
Abstract: 
Policies that are introduced to mitigate adverse consequences of climate change involve economic costs. For some households, these costs will materialise in the form of an increase in prices of consumption goods, whereas for others they will materialise in the form of falling productivity and wages. Disentangling these two effects is important in the light of the design of funds that aim to support the households that are negatively affected by climate policy. In this article, we study the effect of carbon tax on welfare through changes of consumer prices and wages in a general equilibrium setting. In the first step, we review the literature on 'top-down' models, which are used to evaluate the macroeconomic cost of climate policy. We find that these models usually do not account for loss of productivity of workers who must change their sector due to climate policy. In the second step, we develop a theoretical, micro-founded, two-sector model that explicitly accounts for the loss of productivity of workers. The compensation of climate-change mitigation costs would require allocation of separate funds for the affected consumers and workers.
Subjects: 
computable general equilibrium models
integrated assessment models
just transition
macroeconomic costs of transition
welfare compensation
JEL: 
Q52
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by-nc-nd Logo
Document Type: 
Article

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