Skip to main content
placeholder image

Emissions Pricing Policies and Business Cycles: Fixed vs. Variable Tax Regimes

Journal Article


Download full-text (Open Access)

Abstract


  • As by-products, emissions follow economic fluctuations. Ignoring this fact in environmental policies can lead to unexpected emissions fluctuations and an increase in intervention costs. Using a real business cycle model, we compare two policies: a fixed tax policy where the price is constant over time and a variable tax regime where the tax rate is set at the beginning of each period. We find that while both programs result in lower emissions, a variable tax regime is preferable since first, it can ensure that the maximum welfare is always achieved, and second, it is more effective in stabilising emissions.

Publication Date


  • 2020

Citation


  • Ramezani, F., Harvie, C. & Arjomandi, A. (2020). Emissions Pricing Policies and Business Cycles: Fixed vs. Variable Tax Regimes. The Australian Economic Review, 53 (1), 76-92.

Scopus Eid


  • 2-s2.0-85074427031

Ro Full-text Url


  • https://ro.uow.edu.au/cgi/viewcontent.cgi?article=2656&context=buspapers

Ro Metadata Url


  • http://ro.uow.edu.au/buspapers/1635

Number Of Pages


  • 16

Start Page


  • 76

End Page


  • 92

Volume


  • 53

Issue


  • 1

Place Of Publication


  • Australia

Abstract


  • As by-products, emissions follow economic fluctuations. Ignoring this fact in environmental policies can lead to unexpected emissions fluctuations and an increase in intervention costs. Using a real business cycle model, we compare two policies: a fixed tax policy where the price is constant over time and a variable tax regime where the tax rate is set at the beginning of each period. We find that while both programs result in lower emissions, a variable tax regime is preferable since first, it can ensure that the maximum welfare is always achieved, and second, it is more effective in stabilising emissions.

Publication Date


  • 2020

Citation


  • Ramezani, F., Harvie, C. & Arjomandi, A. (2020). Emissions Pricing Policies and Business Cycles: Fixed vs. Variable Tax Regimes. The Australian Economic Review, 53 (1), 76-92.

Scopus Eid


  • 2-s2.0-85074427031

Ro Full-text Url


  • https://ro.uow.edu.au/cgi/viewcontent.cgi?article=2656&context=buspapers

Ro Metadata Url


  • http://ro.uow.edu.au/buspapers/1635

Number Of Pages


  • 16

Start Page


  • 76

End Page


  • 92

Volume


  • 53

Issue


  • 1

Place Of Publication


  • Australia