Modelling the Economy-Wide Effects of Unilateral Co2 Pricing Under Different Revenue Recycling Schemes in Austria - Part B: Potentials for a Triple Dividend

Abstract

In this paper we identify policy implications for implementing carbon pricing in Austria, taking into account model structure uncertainty (see Part A: Kirchner et al., 2023). Methodologically, we compare the results of two macroeconomic models, DYNK and WEGDYN_AT, to evaluate the effects of carbon pricing 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”).

Keywords: revenue recycling, macroeconomic impacts, distributional impacts, model comparison, Austria, Carbon pricing