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Optimal carbon tax rates in a dynamic stochastic general equilibrium model with a supply chain

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  • Chan, Ying Tung
  • Zhao, Hong

Abstract

This study investigates the role of the production supply chain in the choice of climate policies. We construct an environmental dynamic stochastic general equilibrium (E-DSGE) model that features multiple stages of production and different types of productivity shocks. Existing E-DSGE models for climate policy evaluation assume a single production stage. We find that the optimal carbon tax rates in all production stages are procyclical to aggregate supply shocks and countercyclical to aggregate demand shocks; however, if the shock arises from a particular production stage, the implied optimal carbon tax rates vary across stages and depend on the nature of the shocks.

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  • Chan, Ying Tung & Zhao, Hong, 2023. "Optimal carbon tax rates in a dynamic stochastic general equilibrium model with a supply chain," Economic Modelling, Elsevier, vol. 119(C).
    • Handle: RePEc:eee:ecmode:v:119:y:2023:i:c:s0264999322003467
    DOI: 10.1016/j.econmod.2022.106109
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    2. Yuuki Yoshimoto & Koki Kishimoto & Kanchan Kumar Sen & Takako Mochida & Andrew Chapman, 2023. "Toward Economically Efficient Carbon Reduction: Contrasting Greening Plastic Supply Chains with Alternative Energy Policy Approaches," Sustainability, MDPI, vol. 15(17), pages 1-19, September.
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    4. Ana Medina-López & Montserrat Jiménez-Partearroyo & Ángeles Cámara, 2023. "A Dynamic CGE Model for Optimization in Business Analytics: Simulating the Impact of Investment Shocks," Mathematics, MDPI, vol. 12(1), pages 1-42, December.

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    More about this item

    Keywords

    Supply chain; E-DSGE model; Carbon tax rate; Ramsey problem;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Adoption and Costs; Distributional Effects; Employment Effects
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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