國(guó)際貨幣基金組織（IMF）：歐元區(qū)的碳定價(jià)和通貨膨脹

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PAPER

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CarbonPricesand

InflationintheEuroArea

MaximilianKonradt,ThomasMcGregor,andFrederikToscani

WP/24/31

IMFWorkingPapersdescriberesearchin

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elicitcommentsandtoencouragedebate.

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representtheviewsoftheIMF,itsExecutiveBoard,

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2024

FEB

*Konradt(GenevaGraduateInstitute);McGregorandToscani(IMF).WearegratefulforusefulsuggestionsfromseminarparticipantsatEuropeanCommission,EuropeanCentralBankandInternationalMonetaryFund.

?2024InternationalMonetaryFund

WP/24/31

IMFWorkingPaper

EuropeanDepartment

CarbonPricesandInflationintheEuroArea

PreparedbyMaximilianKonradt,ThomasMcGregorandFrederikToscani*

AuthorizedfordistributionbyOyaCelasun

February2024

IMFWorkingPapersdescriberesearchinprogressbytheauthor(s)andarepublishedtoelicit

commentsandtoencouragedebate.TheviewsexpressedinIMFWorkingPapersarethoseofthe

author(s)anddonotnecessarilyrepresenttheviewsoftheIMF,itsExecutiveBoard,orIMFmanagement.

ABSTRACT:Whatistheeffectofcarbonpricingoninflation?Thispapershowsempiricallythatthe

consequencesoftheEuropeanUnion’sEmissionTradingSystem(ETS)andnationalcarbontaxationon

inflationhavebeenlimitedintheeuroarea,sofar.Thisresultissupportedbyanalysisbasedonapanellocalprojectionsapproach,aswellaseventstudiesbasedonindividualcountries.Ourestimatessuggestthat

carbontaxesraisedthepriceofenergybuthadlimitedeffectsonoverallconsumerprices.Sincefutureclimatepolicywillneedtobemuchmoreambitiouscomparedtowhathasbeenobservedsofar,includingtheneedforlargerincreasesincarbonprices,possiblenon-linearitiesmightmakeextrapolatingfromhistoricalresults

difficult.Wethusalsouseinput-outputtablestosimulatethemechanicaleffectofacarbontaxconsistentwiththeEU’s‘Fit-for-55’commitmentsoninflation.Therequiredincreaseofeffectivecarbonpricesfromaround40EuropertonofCO2in2021toaround150Euroby2030couldraiseannualeuroareainflationbybetween0.2and0.4percentagepoints.Itisworthnotingthattheenergypriceincreasescausedbytheriseintheeffectivecarbonpriceto150Euroissubstantiallysmallerthantheenergypricespikeseenin2022followingthe

invasionofUkraine.

JELClassificationNumbers:

E31,E50,Q54,Q43

Keywords:

Greentransition;carbontaxes;climatepolicy;inflation

Author’sE-MailAddress:

maximilian.konradt@graduateinstitute.ch;TMcGregor@;Ftoscani@

WORKINGPAPERS

CarbonPricesandInflationinthe

EuroArea

MaximilianKonradt,ThomasMcGregor,andFrederikToscani

MFWORKINGPAPERSTheGreenTransitionandInflationintheEuroArea

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Contents

ExecutiveSummary

4

I.Introduction

5

RelatedLiterature

8

II.ThreeDecadesofCarbonPricingintheeuroarea

10

Nationalcarbonpricing

10

EmissionsTradingScheme(ETS)

11

III.DataandEmpiricalStrategy

12

Data

12

EmpiricalStrategy

15

IV.AggregateResults

16

NationalCarbonTaxes

16

CombinedImpactofNationalCarbonTaxesandtheETS

19

Robustness

21

Cross-countryheterogeneity

22

V.CaseStudies

23

VI.LookingAhead:MechanicalEffectsofFutureClimatePolicyonConsumerPrices

25

VII.Conclusions

29

References

31

AnnexI.AdditionalTablesandFigures

34

AnnexII.GTAPtoHICPmatching

38

FIGURES

1.ETSFreeAllowancesandSurrenderedUnits,2005–21

12

2.NationalCarbonTaxesintheEA,1990–2019

14

3.EUETSPriceandCoverages,2005–19

14

4.DynamicImpulseResponsesofInflation(inp.p.)toNationalCarbonTaxes

18

5.DynamicImpulseResponsesofInflation(inp.p.)toNationalCarbonTaxesandETS

20

6.DynamicImpulseResponsesofPriceLevel(inp.p.),toNationalCarbonTaxesandETS

20

7.RobustnessTests

22

8.ImpactofCarbonTaxesonPriceLevelConditionalonMacroeconomicEnvironment

23

9.EventStudies

25

10.CarbonPricePathUnderFit-for-55

28

11CumulativeEffectsofCarbonTaxonConsumerPrices,EuroArea

28

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TABLES

1.NationalCarbonTaxes

13

2.EnergyInputs,CarbonIntensitiesandPrices,2021

27

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ExecutiveSummary

Thereisbroadconsensusamongpolicymakersthatnetcarbonemissionsneedtobereducedtozerobymid-centuryinordertomitigatecatastrophicclimatechange.Inlightofthisurgency,andthemanycommitments

madebygovernments,understandingtheeconomiceffectsofclimatepolicyisapriority.Inthispaperwefocusonwhethercarbonpricingaffectsinflationintheeuroarea.Wecarryoutthreetypesofanalyses.

First,weestimatetheimpactoninflationofchangestothepriceofcarbonduetotheEmissionsTrading

Systemandcarbontaxesintheeuroarea,usingapanellocalprojectionsapproachwithasetoffixedeffectsandmacroeconomiccontrols.Wefindthatcarbontaxeshavenotcontributedmeaningfullytoinflationinthe

euroareaduringtheperiodofanalysis,andwheretheyhave,theimpactislikelytohavebeenshort-lived.Ourresultsinsteadsuggestthatcarbontaxeschangedrelativeprices,raisingthecostofenergy,withouta

significantoverallincreaseinthepricesofgoodsandservices.

Second,weexploittwocasesinwhichcountriesexperiencedsignificantincreasesintaxratesoverashort

periodoftime.WeestimateeventstudiesbasedontheFinnishtaxrevisionin2011andtheFrenchcarbontaxenactmentin2014,byconstructingarespectivecounterfactualeconomywithoutacarbontax.Although

consumerpricesgrewslightlyfasterinthesecases,comparedtothecounterfactualeconomies,thedifferenceissmalloverafive-yearhorizonafterthetaxchange(0.15percentagepointsperyear).

Third,wesimulatetheconsumerpriceeffectsofaneffectivecarbonpriceincreaseconsistentwiththeEU’s

‘Fit-for-55’goals,basedondetailedinput-outputtables.Sincefuturepolicywillhavetobemoreambitiousthanwhathasbeenobservedhistorically,whichcomplicatesout-of-samplepredictions,thisexercisecomplementstheregressionanalysisbyquantifyingthemechanicalimpactofaplausiblecarbonpricepath.Theresultsimplyanincreaseinoverallconsumerpricesofbetween0.2and0.4percentagepointsannuallyattheeuroarea

levelover2022-2030,dependingonthedegreeofpass-throughfromproducertoconsumerprices,withsomeheterogeneityacrosscountries.Itisworthnotingthattheresultingincreasesinthepriceoffossilfuelsand

electricityaresignificantlysmallerthanthoseobservedinEuropeduring2022,asaresultofthewarinUkraine.

MFWORKINGPAPERSTheGreenTransitionandInflationintheEuroArea

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I.Introduction

Thereislittledoubtthatclimatechangeisthechallengeofourtime,requiringtremendouseffortsboth

domesticallyandinternationallytolimitgreenhousegasemissionsandpromotethegreentransitiontopreventacatastrophicriseinglobaltemperatures.CountriesinEuropehavecommittedtode-carbonizingtheir

economiesoverthenextdecadeandbeyond(e.g.‘Fit-for-55’bytheEuropeanCommission).1Despitebroadconsensusthatmoreactionisnecessary,thereremainsuncertaintyaroundtheeconomiceffectsofclimatepolicy.Onekeyquestionforthemedium-terminflationoutlookinEuropeandtheeuroareais:willthegreentransitionleadtohigherinflation?

Prominently,LarryFink(2021)madeheadlinesbypredictingthatclimatepolicywouldfuelglobalinflation.

Moreover,theECBhasacknowledgedthatcentralbanksshouldtakeinflationaryeffectsrelatedtothegreentransitionintoaccountintheirpolicyactions(Schnabel2022).Pisany-Ferry,inaseriesofcontributions(for

example,PetersonPolicyBrief2021),andtheGovernoroftheNationalBankofBelgium,PierreWunsch

(2023),discussthemacrocostsofthepoliciesneededtoaddresstheclimateemergency.2Thechief

economistoftheEuropeanCommission’sDirectorateGeneralforEnergyinaspeechattheECB’sSintra

forum(2023)laidoutsixdifferentchannelsthroughwhichthegreentransitioncouldimpactprices:(i)changesincommoditiesandtheenergymix,(ii)replacementofthecapitalstockandinfrastructure,(iii)changesin

overalldemandandconsumptionpatterns,(iv)possiblechangesinthecostofelectricitydrivenbyrenewables,(v)thedirectimpactofcarbonpricesandtaxation,and(vi)uncertaintyandhigherriskpremia.3Herewefocusonthedirectimpactsunder(v),buildingonavastliterature,goingbackalmost30years,onthechannels

throughwhichcarbonpricingimpactsmacroeconomicanddevelopmentoutcomes,whichissummarizedbyHeineandBlack(2019).

So,whatisthestateofcarbonpricinginEurope?CarbonpricinghasarelativelylonghistoryinEurope.Mostcountrieshavehadsomeformofexcisetaxonfuels,withthefirstcountriesenactingexplicitcarbontaxesintheearly1990s.Asof2023,Europeremainsagloballeaderintermsofcarbonpricing.Manycountrieshaveenactednationalcarbontaxeswithvaryinglevelsofambitionand,afteralongperiodofverylowprices,theflagshipEmissionsTradingSystem(ETS),thatcovers40percentoftheEuropeanUnion(EU)emissions,hasseenpricesatacomparativelyhighlevelofaround85EuropertonofCO2sinceearly2022.Itisworthnotingthatgovernmentscanaffectthepriceofcarboninaneconomyinmanywaysotherthanthedirectpricingofcarbon,includingindirecttaxation,tariffsandsubsidypolicesforrenewableenergies,andregulation.Inthispaper,wefocusnarrowlyonthecarbonpricethatisduetonationalcarbontaxationaswellastheETSprice.

Asof2021,thebaseyearforoursimulations,thecombinedeffectivecarbonpriceduetonationalcarbontaxesandtheETSwasroughly40Europertonintheeuroarea.Wheredoeffectivecarbonpricesneedtogoto

deliveronthe‘Fit-for-55’targets?Uncertaintyaroundthatlevel,andwhatotherpolicyleverswillneedtobeemployed,isveryhigh.TheOECD(2021)summarizesresearchwhichestimatesa2030effectivecarbon

1TheFit-for-55package,announcedbytheEuropeanUnionin2022,isaproposaltoreducegreenhousegasemissionsintheEuroblocoverthemediumterm.Specifically,itisdesignedtoreduceemissionsby55percentby2030(relativeto1990levels)andachievenetzeroby2055.Itfeaturesincreasesintheuseofrenewableenergysources,whicharesettoriseto42.5percentby2030.

2/publications/policy-briefs/climate-policy-macroeconomic-policy-and-implications-will-be-significantand/sites/default/files/2023-06/2023-06-05wunsch-ppt.pdf

3https://www.ecb.europa.eu/pub/conferences/ecbforum/shared/pdf/2023/Gil_Tertre_paper.pdf

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pricesinlinewiththeParisagreementintherangeof50-225EuropertonofCO2,withancentralestimateof120Euro.BasedonIEAanalysis,Brandetal.(2023)inanECBblog,assumeaneffectivecarbonpriceof140EuropertonofCO2in2030toachievethe‘Fit-for-55’goals.Breckenfelderetal.(2023)inacomprehensivereviewcitearangeof50-150EuropertonofCO2.InthispaperwewillassumeaneffectivepriceofEuropertonofCO2by2030inlinewiththebenchmarkassumedintheOctober2022IMFWorldEconomicOutlook.

Thisimpliesanincreaseof112Eurointheeffectivecarbonpriceoverthe2021-2030period(slightlyabove12Europeryear).

FollowingRussia’sinvasionofUkraine,andtheresultingsurgeinenergypricesthroughoutEurope,the

questionofhowcarbonpricingaffectsconsumerenergypriceshasreceivedparticularattention.Butsimple

calculationssuggestthattheactualpricemovementsseenin2022weremuchlargerthantheimpliedeffectsofacarbonpriceincreaseconsistentwiththe‘Fit-for-55’2030goals.Forinstance,duetothesupplyshock,the

(futures)priceofdieselandelectricity(forGermany)rosefrom2.70Europerliterand150Europermwhin

January2022to4.18Euroand571EurobyAugust2022,respectively.Nowsupposethat,insteadofthese

observedpriceincreasesof55and280percent,therehadbeennosupplyshock,buttheEUhadincreased

thepriceofcarbonby112Euro/ton,inlinewiththecarbonpriceof150Europertonassumedfor2030above,inearly2022.Theincreaseincarbonpriceswouldhavemechanicallydoubledthepriceofcoal,butthe

increaseinthepriceofdieselandelectricitywouldhavebeencomparativelylimited,at11and17percent

respectively.4Inreality,thehighestETSpricereachedin2022wasaround90EuropertoninAugust(ratherthan150Euro),suchthattheactualcontributionofcarbonpricestothespikeindieselandelectricityprices

wassmallerstill,andnotmorethanaround5percentagepoints,afractionofthetotal55and280percent

increasesactuallyobserved.Kuiketal.(2022)alsoconfirmthatcarbonpricinghashadalimitedcontributiontoenergypricesthroughout2021and2022.

Thispaperaimstoaddressthespecificquestionofhowcarbonpricingmightaffectinflationintheeuroarea.5Wefocusontheeuroareafortworeasons.First,Europeisaregionwithalongandextensivehistoryofcarbonpricing.SeveraleuroareacountriesputapriceoncarbonthroughboththeEUETSandnationalcarbontaxes,whichhavebeenthesubjectofseveralacademicstudies.6Second,theeuroareaservesasaninteresting

casestudytoestimatethemacroeconomiceffectsofclimatepolicywithlimitedmonetarypolicyreactionstocountry-levelshocks.SincetheECB’smandateisforthecurrencybloc,andsodoesnotrespondtoindividualcountryconditions,itallowsforacleaneridentificationofchangestonationalcarbonprices.

Theeffectsofclimatepolicyoninflationinprincipledependontwocompetingfactors.Ontheonehand,inthepublicdebate,punditsoftenlikentheeconomiceffectsofcarbonpricingtooilpriceshocks.Avastliteraturestudyingtheeconomiceffectsofoilpricechangesimpliespotentiallyadverseconsequencesofincreasingthecostofenergybypricingcarbon(seee.g.Hamilton2000,Kilian2009).Indeed,toafirstorderapproximation,onewouldexpectacarbontaxtohavebothinflationaryandcontractionaryproperties,basedontheoilpriceexample.

4DetailedcalculationsforeachenergycategoryarepresentedinTableA.2.Notethattherelativepricechangescausedbythe2022energypriceshockareverydifferentfromthoseachievedunderdesirablecarbonpricing.Mostprominently,thepriceofnaturalgaswashigherthanthatofcoalduringpartsof2022,theexactoppositeofwhatacarbontaxseekstoachieve.

5Themonetaryconsequencesofclimatepolicyareakeyconcernforcentralbanksinadvancedeconomiesmoregenerally(seeMcKibbinetal.2021).

6Seee.g.,MetcalfandStock(2020),KonradtandWederdiMauro(2022),K?nzig(2022).

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Ontheotherhand,carbonpricechangesareconceptuallydifferentfromoilpricechanges.Carbontax

implementationismorepredictable,forexample,oftensetatthestartofafiscalyear,orevenmoreinadvance,andareintendedtobepermanent,unlikeoilpricechangeswhichoftenprovetemporary.Thepermanent

natureimpliesthatwhilecarbontaxeschangerelativeprices,theymaynotleadtobroadpriceincreases,asfirmsandhouseholdscanadjusttheirconsumptionexpenditurebyswitchingtowardslesscarbon-intensivegoodsandservices(seeAndersson2019).Carbontaxesalsofrequentlyfeaturerevenuerecyclingschemes(e.g.Klenertetal.2018).7Indeed,theuseoffiscalrevenuesgeneratedfromcarbontaxationisanimportantfactorindeterminingthemacroeconomicimpacts.8Inaddition,byinternalizingthecostofcarbonemissions,carbonpricingpoliciescanspurinvestmentingreentechnologies,bringingdowntheircosts,andcrowdinginprivateinvestment(including,forexample,vianon-pricingpoliciessuchasfeed-intariffsandregulation)thusreducingthepublicinvestmentneedsovertime.9

Weinvestigatetheextenttowhichcarbonpricingintheeuroarea,duetocarbontaxationandtheETS,

contributestoinflationthroughthreetypesofanalysis.First,wedrawonthreedecadesofcarbonpricingintheeuroareatoestimatetheempiricalresponseofinflationtocarbonpricing.Specifically,wecomputedynamicimpulseresponsefunctionsinacross-countrypanelwithannualdata,controllingforoutput,energyprices,

policyrates,andenvironmentalregulation,aswellascountryfixedeffects,basedontheEUETScarbonpriceandeightnationalcarbontaxes.Ourresultssuggestthatcarbonpricingdoesnotleadtomeaningfulincreasesininflation.Theimpulseresponsesofheadlineandcoreinflationshowonlyasmallandtemporaryimpactandareestimatedaroundzeroafterfiveyears,althoughtheimpactisheterogenousacrosscountries.Energypriceinflationshowsasmallinitialimpact,butalsodoesnotincreasesignificantlyoverthemedium-term.

Lookingattheleveleffectalsoconfirmsthattheoverallconsumerpricelevelisnotaffectedmeaningfullyafterfiveyears.Thepriceofenergyshowsanincreasethatispersistentovertime,however.Thisisconsistentwithaviewthatcarbontaxeschangerelativepricesbutdonotleadtoaggregateinflation(orchangesinthepricelevel).TheseresultsareconsistentwithagrowingliteratureonthelimitedeconomiceffectsofcarbonpricinginEurope(MetcalfandStock2020,KonradtandWederdiMauro2023).Theyarealsoconsistentwithevidenceusingmicroeconomicdataandoilpricechanges(Gaoetal.2014),aswellasmodelsofrelativepricechangeswithinflationhavingbothatransitoryandapermanentcomponent(Aoki2001).Ourfindingsarerobustto

variousalternativespecificationsandtoincludingadditionalcontrolsbut,aswediscussbelow,theymightnotberobusttothesizeoftheshock,leadingustocomplementtheregressionanalysiswithsomesimpleforward-lookingsimulations.

Second,inadditiontothecross-countrystudyfocusingontheaverageeffect,wecarryoutindividualcase

studiestoassesswhethertherearemeasurableeconomiceffectsifcarbonpricingismoreambitious.Theideahereisthattheaggregateeffectsestimatedabovemaymasktheimpactsofmoresizableandabruptcarbontaxchangescertaincountrieswithlesstimeforadjustment.Weuseaneventstudyframeworktoassessthe

inflationaryresponsetosignificantcarbontaxchangesinFinland(2011)andFrance(2014).Thisanalysis

7Asanexample,theFrenchgovernmentfirstannounceditsplansforacarbontaxinAugust2013andparliamentvotedinfavorinDecember2013.Inconjunctionwiththetaxenactmentthatcameintoeffectin2014,thegovernmentcommunicatedthepathofthetaxrateoverthenextthreeyears,until2016.

8ItisworthnotingthattherevenuerecyclingpotentialformtheETSismuchlowerthanforbroadercarbonpricingpoliciesfortworeasons:(i)morevolatilerevenuesfromETS,and(ii)ETSgenerallyfallundertheremitofsectoralministriesratherthanfinanceministries,whogenerallyhavelessincentivetorecyclerevenues.

9Althoughitisnotclearthecrowinginofprivateinvestmentwouldhaveanyaggregatedemandimplicationsandtherefore

inflationaryeffects.Muchwoulddependontherelativecostofborrowingbetweenthepublicandprivatesector,thewayinwhichpublicspendingisfinanced(taxvsdebt)andtheefficiencyofinvestment.

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yieldsverysimilarconclusions.Inbothcountries,wefindlittlesupportforcarbontaxchangesleadingtolargepriceeffects.Bycomparingtheevolutionofthepricesineachcountryafterthetax,relativetoaplausible

counterfactualeconomybasedonothereuroareacountries(AbadieandGardeazabal2003),wefindonlyminordifferencesintheheadlineHarmonisedIndexofConsumerPrices(HICP)overafive-yearperiod.

Finally,oneconcernwithextrapolatingtheempiricalresultsisthathistoricalcarbontaxes,andtheirimplied

economiceffects,mightnotbeagoodguidefortheimpactsoffuturepolicy,duetothelimitedscopeand

ambitionofcarbonpricingsofar,relativetothe‘Fit-for-55’goalsfor2030.Thefinalpartofouranalysistriestoanswerthequestion:howlargecouldtheinflationaryimpactsofalinearlyincreasingcarbonpricebeoverthenexteightyears?Tothisend,wecalibrateasetofsimulationsontheeffectsofambitiousclimatepolicy,

consistentwithcommitmentsmadebyeuroareacountries.Weusedetailedinput-outputtablescovering65economicsectorsandfivetypesofenergyinputs(seeArietal.2022)tocomputetheeffectofcarbonpricingoninflationby2030.

Quantitatively,oursimulationsimplyanincreaseininflationofbetween0.2and0.4percentagepointsperyearuntil2030underacarbonpricepathwhichtakeseffectivecarbonpricesto150EuropertonofCO2by2030.Themagnitudeoftheinflationeffectdependsonassumptionsonthestrengthofpass-throughfromproducertoconsumerprices,aswellasdemandsideadjustmentsbyhouseholdsandfirms.Inourbaselinescenario,with75percentpass-throughtoconsumerpricesandenergydemandadjustmentsbyfirmsestimatedfromthedata,wefindacumulativeeffectonconsumerpricesof2.7percentagepointsby2030.

Tentativeresultsalsosuggestthatthesizeofthecumulativeeffectvarieswidelyacrosscountries,dependingontheenergyintensityandenergymixofdomesticproductionandelectricitygeneration,theinitiallevelof

carbontaxationintheeconomy,aswellashouseholdpreferencesforenergy-intensivegoodsandservices.

RelatedLiterature

Ourpaperisrelatedtoseveralstrandsoftheexistingliterature,whichcanbeclassifiedintotwocategoriesofstudies.Thefirsttriestoassesstheeffectsofclimatepolicyoninflationandoutputbasedonexistingcarbontaxesimplementedsincetheearly1990s.Bydesign,thesestudiesmostlyfocusonearlyadoptersofclimatepolicy,includingBritishColumbiaandEuropeancountries.10Thesecondstrandofresearchisbasedon

simulatingtheeffectsofdifferentclimatepoliciesoneconomicvariablesusinglarge-scalestructuralmodels.

Startingwiththeempiricalstudies,Metcalf(2019)andMetcalfandStock(2020)studytheeconomiceffectsofcarbonpricinginBritishColumbiaandapanelofEuropeancountries,respectively.Methodologicallytheyusedynamicpanelmodelsandlocalprojectionstoestimatetheresponseofunemployment,GDPandemissionstocarbontaxchanges.Theirresultsindicatethatthereisnoevidenceconsistentwithanadverseeffectonoutputandunemployment.Atthesametime,theyfindarobustnegativeresponseofemissionstocarbonpricing.

Focusingonthemonetaryside,KonradtandWederdiMauro(2023)adoptasimilarstrategytostudythe

responseofinflationtocarbontaxationinEuropeancountriesandCanadianprovinces.Consistentwith

previousliterature,theresultspointtoclosetozeroeffectsofcarbontaxshocksoninflationinbothsamples.

10Indeed,theearliercarbonpricingpolicesarestarted,thelowerthefinalcarbonpriceneedstobeandthemoregraduallyitcanbephasedin,thusresultinginsmallerandlessvolatilerealimpacts(McKibbinetal.,2017)

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K?nzig(2022)isanotherrecentstudythatshedslightontheemissionstradingsystemintheEU.ThestudylooksatEuropeancountriesthattaxcarbonintheenergyandpowersectorsinconjunctionwithnational

carbontaxesandusesaninstrumentalVARstrategy,constructedbyisolatingexogenoussurprisesinETSfuturespricesaroundannouncementsthataffectthesupplyofETScertificates.Forashockcalibratedto

increaseHICPenergyby1percent,theauthorsfindslightlylargereffects,bothoninflation(0.15percent

increasethatfadesoutover2years)andindustrialproduction(0.6percentfallthatpersistsovertwoyears).

Potentialexplanationsforthedifferentresultsincludedifferentsectoralcompositions.WhiletheETSappliestohighemittersthataremorelikelytopassonemissioncosts(seeFabraandReguant,2014),nationalcarbontaxesoperatemainlythroughtransportation,coveringfewertotalemissions,wherehighercostsmaybemoreeasilyabsorbedbyfirmsoravoidedthroughsubstitutionforotherformsoffuelsortransportbyhouseholds.

Model-basedstudiesusingcomputablegeneralequilibriummodels(CGE)findmoresizeable,butnot

dramaticallydifferenteffects.McKibbinetal.(2014)modelaflat15USDpertoncarbontaxintheUSandfindthatitcausesariseinheadlineinfla