Taxing Carbon under Market Incompleteness
Valentina Bosetti, Marco Maffezzoli
Q58, Q54, E2
Carbon Tax, Double Dividend, Heterogeneous Agents Model
Climate Change and Sustainable Development
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.
Suggested citation: Bosetti, V., M. Maffezzoli (2013), ‘Taxing Carbon under Market Incompleteness’, Nota di Lavoro 72.2013, Milan, Italy: Fondazione Eni Enrico Mattei.