Measuring the Macroeconomic Impact of Carbon Taxes
Using new data on European carbon taxes, Gilbert Metcalf and James Stock find that there is no robust evidence of a negative effect on employment or GDP growth from carbon pricing.
Abstract
Policymakers often express concern about the impact of carbon taxes on employment or GDP. Using a new data set on carbon tax rates, we estimate the macroeconomic impacts of these taxes on GDP and employment growth rates for various specifications and samples. Our point estimates suggest a zero to modest positive impact on GDP and total employment growth rates. More importantly, we find no robust evidence of a negative effect of the tax on employment or GDP growth. For the European experience, at least, we find no support for the view that carbon taxes are job or growth killers.
Authors
James Stock
Harold Hitchings Burbank Professor of Political Economy, Harvard University
