The impact of a carbon tax on economic growth and carbon dioxide emissions in Ireland

Conefrey, Thomas; Gerald, John Fitz; Valeri, Laura Malaguzzi; Tol, Richard S.J.

doi:10.1080/09640568.2012.709467

Cited by 70 publications

(42 citation statements)

References 26 publications

Supporting

Mentioning

Contrasting

Unclassified

Order By: Relevance

“…Finally, Conefrey et al (2008) examine in the impacts of a carbon tax on emissions and economic growth, using the HERMES medium-term model of the Irish economy. Imposing a carbon tax of e20 per tonne CO 2 would, they find, result in a modest decline in emissions (between 2% and 2.5%).…”

Section: Related Literaturementioning

confidence: 99%

Carbon tax scenarios and their effects on the Irish energy sector

Cosmo

Hyland

2013

Energy Policy

View full text Add to dashboard Cite

In this paper we use annual time series data from 1960 to 2008 to estimate the long run price and income elasticities underlying energy demand in Ireland. The Irish economy is divided into five sectors: residential, industrial, commercial, agricultural and transport, and separate energy demand equations are estimated for all sectors. Energy demand is broken down by fuel type, and price and income elasticitieis are estimated for the primary fuels in the Irish fuel mix. Using the estimated price and income elasticities we forecast Irish sectoral energy demand out to 2025. The share of electricity in the Irish fuel mix is predicted to grow over time, as the share of carbon intensive fuels such as coal, oil and peat, falls. The share of electricity in total energy demand grows most in the industrial and commercial sectors, while oil remains an important fuel in the residential and transport sectors.Having estimated the baseline forecasts, two different carbon tax scenarios are imposed and the impact of these scenarios on energy demand, carbon dioxide emissions, and government revenue is assessed. If it is assumed that the level of the carbon tax will track the futures price of carbon under the EU-ETS, the carbon tax will rise from e21.50 per tonne CO2 in 2012 (the first year forecasted) to e41 in 2025. Results show that under this scenario total emissions would be reduced by approximately 861,000 tonnes of CO2 in 2025 relative to a zero carbon tax scenario, and that such a tax would generate e1.1 billion in revenue in the same year. We also examine a high tax scenario under which emissions reductions and revenue generated will be greater.Finally, in order to assess the macroeconomic effects of a carbon tax, the carbon tax scenarios were run in HERMES, the ESRI's medium-term macroeconomic model. The results from HERMES show that, a carbon tax of e41 per tonne CO2 would lead to a 0.21 per cent contraction in GDP, and a 0.08 per cent reduction in employment. A higher carbon tax would lead to greater contractions in output.J.E.L. Classification Numbers: Q4,Q52,Q54.Keywords: Environmental tax, Energy demand, CO2 emissions, income distribution. * ESRI and Trinity College Dublin. e-mail: valeria.dicosmo@esri.ie. We thank John FitzGerald, Adele Bergin, Richard Tol, Sean Lyons, Ide Kearney, participants at conferences in UCD and the ESRI seminars for helpful comments and suggestions. Remaining errors and expressed views are our own.

show abstract

Section: Related Literaturementioning

confidence: 99%

Carbon tax scenarios and their effects on the Irish energy sector

Cosmo

Hyland

2013

Energy Policy

View full text Add to dashboard Cite

show abstract

“…A number of studies have suggested how the negative welfare impact can be minimised [Callan et al (2008); Conefrey et al (2012); Verde and Tol (2009)]. 2 to 2unc -0.9 0.1 -1.5 -0.4 -2.6 -0.9 0.4 0.1 …”

Section: Discussionmentioning

confidence: 99%

“…In that situation there is no additional tax revenue available to be recycled and policy responses, such as those discussed in Conefrey et al (2012) and di Cosmo and Hyland (2011), to offset negative welfare impacts will not be feasible. The scale of the welfare losses are difficult to quantify.…”

Section: Welfare Implicationsmentioning

confidence: 99%

“…However, depending on how the tax revenue is used, for example for additional spending or to offset existing taxation, the welfare impacts will differ. Conefrey et al (2012) examine the effect of a carbon tax on the ROI economy and find that when the tax revenue is recycled through lower income taxes a double dividend is possible, yielding both a reduction in emissions and an improvement in economic performance. But if, for example, the tax revenue is recycled as lump-sum transfers to households, the double dividend is unlikely to materialise and negative welfare impacts may be substantial.…”

Section: Welfare Implicationsmentioning

confidence: 99%

See 1 more Smart Citation

Climate policy, interconnection and carbon leakage: The effect of unilateral UK policy on electricity and GHG emissions in Ireland

Curtis¹,

Cosmo²,

Deane³

2014

EEEP

View full text Add to dashboard Cite

This paper examines the effect on Ireland's Single Electricity Market (SEM) of the UK's unilateral policy to implement a carbon price floor for electricity generation based on fossil-fuel. We simulate electricity markets and find that, subject to efficient use of the interconnectors between the two markets, a carbon price floor will lead to carbon leakage, with associated emissions in the Republic of Ireland increasing by 8% and SEM's electricity prices increasing by 2.4%. As the carbon price floor does not affect the number of ETS allowances no change is anticipated in aggregate European emissions. We also find that the EU's proposal to postpone ETS allowance auctions will reduce Irish emissions somewhat but that the trade opportunities associated with the UK carbon price floor means that emissions reductions in Ireland will be lower than might have been otherwise. A carbon price floor will result in substantial tax revenues and had the carbon price floor been implemented in Northern Ireland the larger share of taxes remitted would be paid by Republic of Ireland customers within the SEM. A carbon price floor in the Republic of Ireland is a potential policy option that would generate revenues in excess of €250 million but associated electricity prices increases in excess of 17% would have significant negative welfare and competitiveness effects. John Curtis is grateful for funding from the ESRI Energy Policy Research Centre, Valeria Di Cosmo to Science Foundation Ireland. Paul Deane is grateful of the support of the Environmental Protection Agency under 'TIMES Phase II' funding. We would like to thank John Fitzgerald, Brian O'Gallachoir and Laura Malaguzzi Valeri for helpful advice, participants at the ESRI seminar for comments and suggestions. The usual disclaimer applies.ESRI working papers represent un-refereed work-in-progress by researchers who are solely responsible for the content and any views expressed therein. Any comments on these papers will be welcome and should be sent to the author(s) by email. Papers may be downloaded for personal use only. Working Paper No. 458June 2013 2 Climate policy, interconnection and carbon leakage: the effect of unilateral UK policy on electricity and GHG emissions in Ireland IntroductionThe European Union's energy policy envisages open and competitive energy markets in electricity and gas, maintaining secure energy supplies at the lowest possible cost [CEC (2011)]. Efficient, integrated, and fluid energy markets in Europe are also integral to making the transition to a low-carbon economy [CEC (2012a)]. Among the actions being implemented to achieve these goals is the EU third energy package, which comprises regulations on access to electricity and gas networks and directives concerning common rules for the internal markets in gas and electricity. The mechanisms implementing these new internal energy markets are, for the most part, to be completed by 2014. But the European Commission fears that that deadline will not be met, as Member States are slow in adjusti...

show abstract

“…The basic specification is similar to that set out in the original 1993 paper. Details of the latest version are set out in Conefrey et al, 2008. The model of output determination in the market services sector was published in an article in Bradley, FitzGerald and Kearney, 1991. It saw output in the market services sector as being predominantly driven by domestic demand.…”

Section: The Drivers Of Growth In the Tradable Sectormentioning

confidence: 99%

The Irish Economy Today: Albatross or Phoenix?

FitzGerald

2012

World Economy

View full text Add to dashboard Cite

Within EMU, the state of the balance of payments is a crucial signal of possible dangers in an economy. In the case of Ireland, this signal was ignored, and a failure of banking regulation together with wholly inappropriate fiscal policy allowed the current crisis to happen. In the aftermath of the recession, domestic costs have been cut, producing a substantial increase in tradable sector output. This output response will play a crucial role in eventually returning the economy to growth. Tackling the huge government deficit will be necessarily painful and, until completed, will weigh heavily on domestic demand, delaying a full recovery. It will be important that the fiscal adjustment is undertaken in an ‘employment‐friendly’ manner.

show abstract

The impact of a carbon tax on economic growth and carbon dioxide emissions in Ireland

Cited by 70 publications

References 26 publications

Carbon tax scenarios and their effects on the Irish energy sector

Carbon tax scenarios and their effects on the Irish energy sector

Climate policy, interconnection and carbon leakage: The effect of unilateral UK policy on electricity and GHG emissions in Ireland

The Irish Economy Today: Albatross or Phoenix?

Contact Info

Product

Resources

About