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arXiv · 2307.16554

The fiscal implications of stringent climate policy

Richard S. J. Tol
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Abstract

Stringent climate policy compatible with the targets of the 2015 Paris Agreement would pose a substantial fiscal challenge. Reducing carbon dioxide emissions by 95% or more by 2050 would raise 7% (1-17%) of GDP in carbon tax revenue, half of current, global tax revenue. Revenues are relatively larger in poorer regions. Subsidies for carbon dioxide sequestration would amount to 6.6% (0.3-7.1%) of GDP. These numbers are conservative as they were estimated using models that assume first-best climate policy implementation and ignore the costs of raising revenue. The fiscal challenge rapidly shrinks if emission targets are relaxed.

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Richard S. J. Tol. 2023-07-31. The fiscal implications of stringent climate policy. https://arxiv.org/abs/2307.16554

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