Fiscal implications of climate change

Jones, Benjamin; Keen, Michael; Strand, Jon

doi:10.1007/s10797-012-9214-3

Cited by 46 publications

(23 citation statements)

References 81 publications

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“…In light of these shortcomings, several authors have argued for a broad and coherent strategy. 30,31 In particular, climate finance is frequently regarded as an opportunity not only to tackle climate-related aspects, but also to address sustainable development in a broader sense. That is, climate finance is seen as a tool to achieve transformative change to redirect development patterns away from a lock-in of carbonintensive energy infrastructures toward long-term 'green growth.'…”

Section: Novel Options For Climate Financementioning

confidence: 99%

From climate finance toward sustainable development finance

Steckel

Jakob

Flachsland

et al. 2016

WIREs Climate Change

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Decarbonizing the global energy system requires large‐scale investment flows, with a central role for international climate finance to mobilize private funds. The willingness to provide international finance in accordance with common but differentiated responsibilities was acknowledged by the broad endorsement of the Paris Agreement, and the Green Climate Funds in particular. The international community aims to mobilize at least USD 100 billion per year for mitigation and adaption in developing countries. In this article, we argue that too little attention has been paid on the spending side of climate finance, both in the political as well as the academic debate. To this end, we review the challenges encountered in project‐based approaches of allocating climate finance in the past. In contrast to project‐based finance, we find many advantages to spending climate finance in support of price‐based national policies. First, the support for international climate cooperation is improved when efforts of successively rising domestic carbon pricing levels are compensated. Second, carbon pricing sets incentives for least‐cost mitigation. Third, investing domestic revenues from emission pricing schemes could advance a country's individual development goals and ensure the recipient's ‘ownership’ of climate policies. We conclude that by reconciling the global goal of cost‐efficient mitigation with national policy priorities, climate finance for carbon pricing could become a central pillar of sustainable development and promote international cooperation to achieve the climate targets laid down in the Paris Agreement. WIREs Clim Change 2017, 8:e437. doi: 10.1002/wcc.437 This article is categorized under: Climate Economics > Economics and Climate Change Climate and Development > Decoupling Emissions from Development

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Section: Novel Options For Climate Financementioning

confidence: 99%

From climate finance toward sustainable development finance

Steckel

Jakob

Flachsland

et al. 2016

WIREs Climate Change

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“…To ensure that nominal government expenditures (WGOV) remains at the same level as in the baseline scenario, 5 we implement different fiscal instruments.…”

Section: Counterbalancing Instrumentsmentioning

confidence: 99%

“…For a comprehensive assessment of climate change impacts on public budgets, it is therefore necessary to not only look into the direct effects of increased expenditures but also into the indirect effects of a reduced tax base [5,6]. Eventually, the interplay of higher climate-induced expenditures on the one side, and reduced tax revenue on the other side, leads to less available budget for other public service provision such as health and education.…”

Section: Introductionmentioning

confidence: 99%

The Effects of Climate Change Impacts on Public Budgets and Implications of Fiscal Counterbalancing Instruments

Bachner

Bednar–Friedl

2018

Environ Model Assess

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Climate change impacts have manifold effects on public budgets. In this paper, we therefore use a computable general equilibrium framework to consistently analyze how both the expenditure and revenue side of public budgets are affected via climate change impacts in ten different impact fields in Austria by mid-century. We then investigate different options how reductions in public service provision can be counterbalanced by fiscal instruments or by foreign lending and the associated economy-wide effects. We find that without counterbalancing, climate change impacts on the government budgets are doubled when considering not only the direct effect on the expenditure side but also macroeconomic feedback effects which reduce the overall tax base. With counterbalancing, we find significant differences in budgetary and macroeconomic consequences across fiscal instruments. While an increase of the capital tax as well as a cut in transfers reduce the welfare losses of climate change, higher labor taxes amplify welfare losses. This is because higher labor taxes dis-incentivize employing labor, thereby increasing unemployment and unemployment payments by the government. A higher output tax also increases welfare losses, but less strongly than an increased labor tax. Finally, increased foreign lending reduces welfare losses twice as much as the cut in transfers or the increased capital tax in the short term, but leads to a higher deficit and government debt. JEL Classifications Q54 . Q58 . H23 . C68

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“…In the last decade, national strategies for adaptation to climate change have been developed and implemented in numerous countries (Lesnikowski et al 2015). It is widely held that, unlike mitigation, adaptation is a private good and therefore should be carried out by private actors (Tol 2005), whereas the role of the public sector is limited to providing the right incentives (Jones et al 2013) and to correct for market failure (Osberghaus et al 2010). However, the state owns public infrastructure, acts as service provider (e.g., by means of early warning systems), and plays a significant role as information broker (e.g., to coordinate extreme weather event preparedness and response) (Eakin and Patt 2011).…”

Section: Introductionmentioning

confidence: 99%

“…In general, the literature on budgetary implications of climate change impacts and adaptation is scarce. Regarding the direct consequences of climate change impacts for public budgets, some papers describe effects qualitatively and provide empirical estimates for changes in expenditures (Bräuer et al 2009;Margulis and Narain 2010;Osberghaus and Reif 2010;Jones et al 2013;Gilmore and St. Clair 2018). Complementary to these are econometric studies that estimate the effects of climate variability and extreme weather events on public finances (Lis and Nickel 2010;Ouattara and Strobl 2013;Melecky and Raddatz 2015;Leppänen et al 2015); however, they are limited to direct effects on public expenditures, disregarding indirect effects.…”

Section: Introductionmentioning

confidence: 99%

How does climate change adaptation affect public budgets? Development of an assessment framework and a demonstration for Austria

Bachner

Bednar–Friedl

Knittel

2019

Mitig Adapt Strateg Glob Change

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Public adaptation to climate change affects government budgets directly on the expenditure side, but also indirectly via changes in the tax base and government consumption patterns. While such indirect effects have been analyzed intensively for mitigation policies, similarly detailed model-based frameworks and studies for adaptation policy are still missing. The objectives of the present paper are (i) to fill this gap by proposing a general modeling framework that allows for a comprehensive analysis of effects of adaptation on federal budgets, both on the expenditure and the revenue side, as well as of macroeconomic effects and (ii) to demonstrate its usefulness by applying this framework to the case of Austria. We find that public adaptation can lead to substantial positive macroeconomic effects on gross domestic product (GDP), welfare, and employment. The results are robust with respect to assumptions about the effectiveness of adaptation. Also, we demonstrate that it is essential for analysis to cover both the expenditure and revenue side, as overall government revenues can increase due to adaptation, offsetting additional direct public expenses for adaptation, thus increasing the budget balance. This is because of less severe climate change impacts and the corresponding lower payments for post-disaster relief and unemployment benefits as well as higher tax revenues. We thus strongly recommend making use of economy-wide modeling frameworks when planning for adaptation, as they shed light on the true costs and benefits of adaptation.

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Fiscal implications of climate change

Cited by 46 publications

References 81 publications

From climate finance toward sustainable development finance

From climate finance toward sustainable development finance

The Effects of Climate Change Impacts on Public Budgets and Implications of Fiscal Counterbalancing Instruments

How does climate change adaptation affect public budgets? Development of an assessment framework and a demonstration for Austria

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