FEEM working papers "Note di lavoro" series
2013 .072

Taxing Carbon under Market Incompleteness


Authors: Valentina Bosetti, Marco Maffezzoli
Series: Climate Change and Sustainable Development
Keywords: Carbon Tax, Double Dividend, Heterogeneous Agents Model
JEL n.: Q58, Q54, E2

Abstract

This paper is the first attempt, to the best of our knowledge, to study the impact of a carbon tax by means of a heterogeneous agents model. The objectives of the paper are two: i) To assess how the results of a representative agent model compare to those coming from a model accounting for heterogeneity across agents when evaluating aggregate economic and environmental impacts of a carbon tax; ii) To assess the distributional implications of a carbon tax (and equivalent cap) and how they can be mitigated through different recycling schemes or allocations.

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Suggested citation: Bosetti, V., M. Maffezzoli (2013), ‘Taxing Carbon under Market Incompleteness’, Nota di Lavoro 72.2013, Milan, Italy: Fondazione Eni Enrico Mattei.

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