Frederick van der Ploeg, Armon Rezai, Miguel Tovar Reanos

Public Finance Options for Recycling Carbon Tax Revenue in Germany

Section: Articles
FinanzArchiv (FA)

Volume 80 () / Issue 1, pp. 39-69 (31)
Published 22.03.2024

article PDF
Free Content
We use a micro simulation model for Germany to show that it is optimal to use part of carbon tax revenue for handing out climate dividends, part to lower income taxes, and part to make up for public revenue shortfalls. The optimal recycling mix is tilted towards climate dividends away from tax reductions as relative inequality aversion increases. For baseline inequality aversion, up to half of carbon tax revenue is used to fund climate dividends and the rest to fund income tax cuts. We consider the implications of a Linear Expenditure System for carbon price policies.

Frederick van der Ploeg No current data available.

Armon Rezai No current data available.

Miguel Tovar Reanos No current data available.