Climate change policies, such as carbon taxes and emissions trading schemes, have become key tools in limiting global temperature increases. The National Institute of Economic and Social Research analyses the macroeconomic impact of a carbon tax accompanied by a rise in credit constraints. NIESR models how in this scenario, lower GDP and higher inflation can be expected across all major economies.
Key learning objectives:
Identify two key scenarios modelled on a carbon tax shock
Understand the anticipated economic effects of carbon taxes