di OpenEconomics | 28 November 2016

Overview: Under uncertainty of regulation and demand for output, the effect of a carbon tax and trading is ambiguous on achieving a cleaner industrial base. Firms that are more technologically efficient in reducing pollution will tend to acquire larger market shares, but so will also more polluting, small and informal firms that can more successfully evade the tax. The final effect will depend on the extent of the informal sector, the uncertainty of demand for output and the severity of the fine, but in the short run the small firm reaction is likely to reduce the positive impact on emissions, and, at the same time, attenuate the negative effects on incomes and unemployment. The more diversified is the industry in terms of the range of abatement technologies and energy efficiency, the larger will be the social benefits deriving from this effect.

Chair:  Ernesto Sanchez-Triana, Environmental Health and  Pollution Management Global Lead, ENR GP

Discussants: Dan Biller, Practice Manager, MIGA  

Guest Speakers: Pasquale L. Scandizzo, OpenEconomics – University of Rome