Conference Agenda

In this paper we identify policy implications for implementing carbon pricing in Austria, taking into ac-count model structure uncertainty. Methodologically, we compare the results of two macroeconomic models, DYNK and WEGDYN_AT, to evaluate the effects of carbon pric-ing under different revenue recycling options. Specifically, we examine the model results with respect to their findings regarding a potential triple dividend, that we define as a reduction in CO2 emissions, positive effects on GDP and employment, and distributionally progressive improvements in household consumption possibilities. Accounting for model structure uncertainty improves the robustness of our results; at least within the macroeconomic frameworks applied here. Our results confirm the tradeoff between equity and efficiency identified in previous analyses. A triple dividend is likely to emerge only for a combination of the recycling options of non-wage labor cost reductions combined with lump-sum per-capita transfers (also known as “climate bonus”).

This paper analyzes the impact of green subsidies on employment. I develop a multi-sector general equilibrium search model to examine how the subsidies affect unemployment as well as the number of green, fossil, and remaining jobs. The analysis is underpinned by novel empirical estimates on the distribution of jobs and job-to-job transitions in the United States. The estimates indicate that the share of green jobs grew and the share of fossil jobs declined during 2013-2020. The majority of jobs are neither green nor fossil, however, and thus directly unaffected by climate policy. With regard to job-to-job transitions, the data shows a high degree of movement between job types. Inserting the empirical estimates in the search model, I find that green subsidies reduce unemployment if they are financed in a non-distortionary manner. Paying for subsidies with distortionary labor taxes, in contrast, increases unemployment and makes the subsidies perform worse compared to a carbon tax. This is especially the case if preexisting distortions are high.

This paper presents a model of the low-carbon transition, where firms allocate investments between low- and high-carbon technologies based on anticipated climate policies. A ‘green’ and a ‘non-green’ parties compete in regular election cycles to capture voters’ evolving climate policy preferences. We calibrate and numerically simulate the model to study the interplay of political competition, voters’ preferences, firms’ investment choices and the low-carbon transition. We find that the non-green party has a relatively stronger influence on transition dynamics The green party’s best strategy varies with the type of non-green party, as it must find a balance between (i) robust but infrequent policies; and (ii) frequent, less stringent ones. Increased party polarisation prompts firms to distribute investments more evenly across technologies, amplifying uncertainty and causing delays in the transition.

Despite being advanced as the most efficient climate policy tool, carbon pricing has not been implemented to the degree required to reach climate neutrality by midcentury. Drawing form the theoretical literature on mixes of instruments, the current study simulates deep decarbonization scenarios which incorporate a plurality of measures thanks to a large-scale recursive-dynamic international CGE model. To increase realism, vintages of energy-specific capital of fossil and non fossil varieties are represented in all sectors. The structure of emissions and tradeoffs between necessary instrument stringencies are discussed based on three stylised mixes of instruments.