Monday, September 26, 2022
Jose Pedro Bastos Neves (The New School) & Willi Semmler (The New School) presents A Proposal for a Carbon Wealth Tax: Modelling, Empirics, and Policy at Loyola-L.A. today as part of its Tax Policy Colloquium hosted by Theodore Seto:
Although economists widely advocate carbon pricing as an effective solution to reduce carbon emissions, this mechanism has had so far limited effects. This paper proposes a new type of tax to help finance (and accelerate) the green transition. The “carbon assets” tax would be levied on carbon-intensive (brown) wealth rather than carbon-intensive goods. We consider tax implementation issues such as tax base, incidence, and efficiency. Moreover, we analyze the impacts of such a tax scheme by setting up a model of asset pricing and dynamic portfolio decisions. Green and carbon-intensive returns used in the model are calibrated with low-frequency returns on stock prices between 2010 and 2021.
We find that such a tax and subsidy scheme is a feasible and effective instrument in speeding up the transition to a greener economy, particularly in protracted periods of economic contraction. Our approach also brings a new perspective to wealth inequality discussions.
Commentators: David Gamage (Indiana-Maurer; Google Scholar) & Shi-Ling Hsu (Florida State; Google Scholar)