Using a computable general equilibrium, this paper quantifies the GDP and employment effects of an illustrative greenhouse gas emissions reduction policy. The paper first analyses the direct negative economic effects of the emissions restrictions on GDP and examines labour sectoral reallocations in a framework where labour markets are perfectly flexible. The model is then modified to incorporate labour market imperfections in OECD countries that could generate unemployment, namely, short-run rigidities in real wage adjustment. It is shown that imperfect wage adjustment increases the cost of mitigation policy since unemployment increases in the short-run, but that the carbon tax revenue generated can be recycled so as offset some or all of this effect, notably when it is used to reduce wage-taxes. Thus, taking realistic labour market imperfections into account in a CGE model affects the GDP costs of mitigation policy in two ways: first by introducing extra costs due to the increased unemployment that such policy may entail; second by creating the possibility of a double dividend effect when carbon taxes are recycled so as to reduce distorting taxes on labour income.
International trade in environmental goods and services (EGS) may contribute to the achievement of environmental, economic and developmental benefits and to the transition towards a “green economy”. The international community has been exploring several strategies to promote sustainable development through enhanced trade in EGS. One key question remains how to maximise the sustainable benefits of trade liberalisation and market creation/expansion of EGS for developing countries. This paper seeks to explore the possible role of trade preferences for EGS in promoting the transition towards a “green economy”, focusing on potential beneficial effects for developing countries.
This book challenges the conventional wisdom that gasoline taxation, an important and much-debated instrument of climate policy, has a disproportionately detrimental effect on poor people. Increased fuel taxes carry the potential to mitigate carbon emissions, reduce congestion, and improve local urban environment. As such, higher gasoline taxes could prove to be a fundamental part of any climate action plan. However, they have been resisted by powerful lobbies that have persuaded people that increased fuel taxation would be regressive. Reporting on examples of over two dozen countries, this book sets out to empirically investigate this claim. The authors conclude that while there may be some slight regressivity in some high-income countries, as a general rule, fuel taxation is a progressive policy particularly in low income countries. Rich countries can correct for regressivity by cutting back on other taxes that adversely affect poor people, or by spending more money on services for the poor. Meanwhile, in low-income countries, poor people spend a very small share of their money on fuel for transport.
The European Commission and the International Labour Organization have combined efforts in reaction to the deep crisis that hit the global economy in 2008. The aim of this joint project is to examine policies that will lead not only to a quicker recovery but also to a more sustainable, environmentally friendly and equitable global economy. 'Towards a Greener Economy: The Social Dimensions' aims to promote a clearer understanding of the nature of the green economy and its implications for labour markets, especially the reallocation of jobs from high- to low-polluting sectors.
Green growth is about making growth processes resource-efficient, cleaner and more resilient without necessarily slowing them. This paper aims at clarifying these concepts in an analytical framework and at proposing foundations for green growth. The green growth approach proposed here is based on: (1) focusing on what needs to happen over the next 5–10 years before the world gets locked into patterns that would be prohibitively expensive and complex to modify; and (2) reconciling the short and the long term, by offsetting short-term costs and maximising synergies and economic co-benefits. This, in turn, increases the social and political acceptability of environmental policies. This framework identifies channels through which green policies can potentially contribute to economic growth. However, only detailed country- and context-specific analyses for each of these channels could reach firm conclusions regarding their actual impact on growth. Finally, the paper discusses the policies that can be implemented to capture these co-benefits and environmental benefits.