Date of this Version
Tracey, Gregory. 2020. An Inquiry into Double Dividend Effects of Carbon Taxes. Undergraduate Honors Thesis. University of Nebraska-Lincoln.
For my undergraduate thesis, I conducted research on the topic of carbon taxes. Specifically, I was interested in the possible existence of a double dividend effect as a method for making this public policy option more palatable to a broader audience. To that end, I first conducted a literature review on the subject, then did an empirical analysis. I chose Nebraska as the subject of my analysis because it is my home state and I experienced heated debates over tax policy firsthand as a Page for the State Legislature. To see whether a double dividend would exist in Nebraska, I used a simple computable general equilibrium model to model three different scenarios for offsetting a carbon tax: lump-sum payments, reductions in taxes on labor, and reductions in taxes on capital. While my knowledge and resources presented some large limitations, I still found interesting results. Lump-sum payments and reductions in taxes on labor show the same increase in welfare, but the latter is much less distortionary. However, reducing taxes on capital shows by the far the best outcome, as I find a larger increase in welfare, and very limited distortionary effects.