Camille Hainnaux (AMSE)

Will give a presentatio on

"Taxing incognito: optimal climate taxation and inequality"

Abstract

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This paper explores optimal alternatives to carbon taxation using already existing taxes in the economy and its impact on inequality. I build a two-sector Ramsey model with heterogeneous agents, in which the carbon stock harms the final good sector’s productivity and individual utility. I find that there exist several alternatives to the standard carbon tax, both in a first- and second-best setting. Under these alternatives, the carbon tax on energy production is replaced by either taxes on energy consumption or taxes on inputs. In first-best, taxes on inputs act as substitutes to income taxes: the government can choose between making households bear the environmental tax burden or to indirectly tax the energy producer. In the latter case, the final good sector is partly subsidized to compensate for the distortion created by the alternative fiscal policy. Studying the optimal Ramsey fiscal policy, a consumption tax is needed along the carbon tax as long as the social and private gains of increasing energy consumption relatively to final good consumption are unequal. Alternatives to carbon taxation are similar to the first-best ones. Income taxes are now always non-zero and vary with the alternatives chosen. Due to the general equilibrium impact of alternatives to carbon taxation, second-best alternatives affect inequality through several channels."

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