The Economic Consequences of Effective Carbon Taxes
Abstract
This paper studies the sectoral and macroeconomic consequences of carbon taxes in four Nordic countries using a novel monthly measure of effective carbon tax rates. The suggested measure accounts for the time-varying emission coverage of taxes that are both explicitly and implicitly levied on greenhouse gas-emitting goods, thereby solving several issues of existing carbon tax measures currently used by the literature. Employing the new measure in a local projection setting, I find that carbon taxes reduce emissions as expected but also impair macroeconomic activity—though there is some heterogeneity in the effects across sectors and countries. (JEL H23, O44, Q54, Q58)
Fields of Study & Subjects
Climate Change Policy and Economics
Energy
Environment
Economic Growth
Economic Policies and Impacts
Publication details
- Journal / source
- American Economic Journal Macroeconomics
- Publisher
- American Economic Association
- Volume
- 18
- Issue
- 3
- Pages
- 174–199
- Publication date
- 29 June 2026
- Language
- EN