Impact of carbon tax depends partly on spillovers from green technology, economists say
The transition to net zero carbon emissions could raise productivity in the UK even though it would reduce GDP in the short run, a paper published on February 13 by the Bank of England finds.
The authors – Sandra Batten and Stephen Millard – develop a model of a small open economy with energy available from either fossil fuels or renewable sources. They then impose a carbon tax on the model economy and track how the effects play out over time.
The working paper shows that the tax reduces GDP in
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