Environmental policy and macroeconomic dynamics in a new Keynesian model

Annicchiarico, Barbara; Dio, Fabio Di

doi:10.1016/j.jeem.2014.10.002

Cited by 226 publications

(184 citation statements)

References 28 publications

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“…Taking their calibration at face value, a common finding of models which analyze optimal carbon pricing policy is that substantial cyclical adjustment to ETS caps and carbon taxes is required. 29,34,35 In spite of this, Lintunen and Vilmi also find that the welfare gain of an optimal (cyclically varying) carbon tax relative to a constant tax is small. This likely reflects the small variation in marginal damages due to emissions fluctuations.…”

Section: Theory Of Carbon Pricing In Good Times…and Badmentioning

confidence: 99%

How to price carbon in good times … and bad!

Doda

2015

WIREs Climate Change

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Emissions trading systems and carbon taxes are two market-based policy instruments for responding to the climate change externality. This article focuses on the relationship between the design of these carbon pricing instruments and business cycle fluctuations. In particular, whether and how these instruments should respond to business cycles is a topical policy question. To answer it, the article brings together the relevant empirical and theoretical results from the academic literature. It finds that building responsiveness into the design of carbon pricing instruments can reduce the burden of regulation by distributing it more evenly over time. Specifically, relative to a fixed cap emissions trading system, this can be achieved by relaxing the cap during economic expansions and tightening it during recessions. Similarly, a carbon tax regime in which the tax is higher during expansions, and lower during recessions, is likely to improve welfare compared to a cyclically unresponsive tax. In practice, a mechanism which renders real-world carbon pricing instruments responsive is a challenging task. The article provides an overview of the trade-offs involved by focusing on the broad classes of mechanisms explored in the literature. The choice of responsiveness-inducing mechanism must crucially consider country characteristics such as the properties of fluctuations in the country's GDP and emissions, any relevant political economy concerns and its institutional background.

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Section: Theory Of Carbon Pricing In Good Times…and Badmentioning

confidence: 99%

How to price carbon in good times … and bad!

Doda

2015

WIREs Climate Change

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“…2 Hassler and Krusell (2012) also introduced TFP shocks into a regional integrated model of climate and the economy (RICE) to provide an integrated investigation of climate policies on oil-producing and oil-importing countries. The environmental DSGE modelling literature has been extended to include other shocks, such as environmental shocks (Angelopoulos, Economides and Philippopoulos 2013), energy price shocks (Roach 2014), consumption shocks (Argentiero et al 2017) and nominal shocks (Annicchiarico and Di Dio 2015). The contribution of the current article to the literature is not introducing a new type of shock, but comparing the economic and environmental effects of two popular emissions reduction regimes of fixed and variable emissions taxes when a shock occurs.…”

Section: Introductionmentioning

confidence: 99%

“…For instance, in Heutel (2012) and Angelopoulos, Economides and Philippopoulos (2013), the tax rate changes in every period. Hassler and Krusell (2012) specify climate policies in terms of taxation on oil, Fischer and Springborn (2011) and Annicchiarico and Di Dio (2015) include variable tax, cap and an intensity target, and Tumen et al (2016) and Argentiero et al (2017) consider taxes on fossil fuels and subsidies on renewable energy. A review of implemented tax policies in countries such as Finland, Norway, Switzerland and Japan (World Bank 2016), however, indicates that the tax rates in their programs have been estimated and pre-announced a few periods (even years) in advance, and have been kept constant over several periods.…”

Section: Introductionmentioning

confidence: 99%

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

Ramezani

Harvie

Arjomandi

2019

Australian Economic Review

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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.

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“…Noy, 2009). Annicchiarico and Di Dio (2015) investigate the behaviour of an economy with different policy alternatives under the New Keynesian framework. has exclusively analysed the impact of bushfires in a systematic manner.…”

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confidence: 99%

Floods, Bushfires and Sectoral Economic Output in Australia, 1978–2014

Ulubaşoğlu

Rahman

Onder³

et al. 2018

Economic Record

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Using state‐level annual variation in natural disasters and economic output in Australia, we estimate the direct effects of floods and bushfires on sectoral gross value added during the period 1978–2014. We find that floods exert an adverse and persistent effect on the outputs of agriculture, mining, construction and financial services sectors. For example, our estimates indicate that a state that experienced a flood in a given year encountered, on average, 5–6 per cent lower agricultural output in both that year and the following year, compared to another state with no such flood experience. Sectoral responses to bushfires are more nuanced.

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Environmental policy and macroeconomic dynamics in a new Keynesian model

Cited by 226 publications

References 28 publications

How to price carbon in good times … and bad!

How to price carbon in good times … and bad!

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

Floods, Bushfires and Sectoral Economic Output in Australia, 1978–2014

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