What the study found
The study finds that effective carbon taxes reduce emissions, but they also appear to impair macroeconomic activity. The results vary somewhat across sectors and countries.
Why the authors say this matters
The authors present a new monthly measure of effective carbon tax rates that accounts for changes in how emissions are covered by taxes. They suggest this measure helps address problems with carbon tax measures used in earlier research.
What the researchers tested
The paper examines sectoral and macroeconomic consequences of carbon taxes in four Nordic countries. It uses a novel monthly measure of effective carbon tax rates and applies it in a local projection setting, a method for estimating how effects change over time.
What worked and what didn't
Using the new measure, the study finds that carbon taxes work as expected in reducing emissions. However, the same taxes are also associated with weaker macroeconomic activity, and the size of the effects differs across sectors and countries.
What to keep in mind
The abstract does not describe detailed limitations beyond noting heterogeneity across sectors and countries. It also does not provide the size of the effects or information on individual tax designs beyond the new monthly measure.
Key points
- The study examines carbon taxes in four Nordic countries.
- It introduces a monthly measure of effective carbon tax rates.
- The measure accounts for time-varying emission coverage from explicit and implicit taxes on greenhouse gas-emitting goods.
- Carbon taxes are found to reduce emissions.
- Carbon taxes are also found to impair macroeconomic activity, with some heterogeneity across sectors and countries.
Disclosure
- Research title:
- Effective carbon taxes cut emissions but weaken macroeconomic activity
- Authors:
- Felix Kapfhammer
- Institutions:
- BI Norwegian Business School
- Publication date:
- 2026-06-29
- DOI:
- 10.1257/mac.20230083
- OpenAlex record:
- View
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