In this paper, we assess the distributional impact of introducing a carbon tax in Poland. We apply a two- step simulation procedure. First, we evaluate the economy-wide effects with a dynamic general equilibrium model. Second, we use a microsimulation model based on household budget survey data to assess the effects on various income groups and on inequality. We introduce a new adjustment channel related to employment changes, which is qualitatively different from price and behavioural effects, and is quantitatively important. We find that the overall distributional effect of a carbon tax is largely driven by how the revenue is spent: distributing the revenues from a carbon tax as lump-sum transfers to households reduces income inequality, while spending the revenues on a reduction of labour taxation increases inequality. These results could be relevant for other coal-producing countries, such as South Africa, Germany, or Australia

keywords: climate policy; distribution effect; microsimulation model; general equilibrium model, employment

JEL codes: , ,

publication year: 2020

language : English

thematic categories :

publishing series : IBS Working Paper

publication number : 07/2020

ISSN : 2451-4373

Projects related to this publication:

The effect of climate policies on labour market

J. Rodrigo Fuentes

Institute of Economics, Pontifical Catholic University of Chile

Jan Witajewski-Baltvilks

Institute for Structural Research (IBS); Faculty of Economic Sciences, University of Warsaw

Marek Antosiewicz

Institute for Structural Research (IBS); SGH Warsaw School of Economics

Piotr Lewandowski

Institute for Structural Research (IBS)

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