| By: |
Can, Zeynep Gizem (University of Galway);
O'Donoghue, Cathal (National University of Ireland, Galway);
Sologon, Denisa Maria (LISER (CEPS/INSTEAD)) |
| Abstract: |
As middle income countries grow they see an increase in demand for energy. To
avoid extreme climate change as these countries develop, there will be a need
to decarbonise the increased energy consumption as they grow. We use the
PRICES microsimulation model to examine the impact of carbon pricing across
the income distribution in Türkiye. In particular we assess the joint
distributional impact of combining both carbon taxation with revenue
recycling. We evaluate both the relative performance of existing excise duties
and additional carbon taxation. Despite the relative large change in the tax
rate, replacing excise duties with carbon related excise duties has a
relatively small distributional impact, with carbon taxes slightly less
regressive than excised duties. Additional carbon taxes equivalent to €30 per
tCO2 are regressive, increasing inequality. However we find that revenue
recycling has a greater impact on inequality than the tax itself, with
targeted instruments reducing inequality, while flatter instruments when
combing with the carbon tax do not fully compensate for the increased
inequality from the carbon tax. Although the carbon tax reduced emissions,
revenue recycling mitigated this impact with a trade off between
redistribution and emissions reduction. |
| Keywords: |
carbon pricing, middle income countries, revenue recycling, microsimulation |
| JEL: |
Q58 C15 |
| Date: |
2025–02 |
| URL: |
https://d.repec.org/n?u=RePEc:iza:izadps:dp17701 |