Estimating the Jobs Impacts of Different Carbon Tax Designs.

Lehr, U., Dorband, I. & Hardadi, G. (2024): Estimating the Jobs Impacts of Different Carbon Tax Designs. World Bank Group, Washington, D.C.

Abstract

There is broad consensus that sufficiently high carbon prices are important in moving countries to low carbon pathways. Carbon pricing disincentivizes carbon-intensive activities, and the revenues generated could finance climate actions as well as support households and firms. When climate policies, such as renewable energy investments and energy efficiency programs, are designed in a way that stimulates job creation, a double dividend can be achieved: lower greenhouse gas (GHG) emissions and more jobs. The analysis reported here assesses different policy designs around a carbon tax reform, focusing on the direct and indirect implications for jobs. By filling this important knowledge gap, governments will be empowered to take better-informed and possibly more ambitious action. It is important for many governments to compare expected economic outcomes with outcomes in other countries, which they consider their peer, and to understand better why results might differ. Economic outcomes can be compared using several indicators. Often, governments want to compare with their regional neighbors, for instance, to find out if investment in clean energy and a carbon tax have the same effects in Egypt and Morocco. As countries in a region often differ in economic progress and income level, another interesting comparison might be within the same income group. More aspirational would be a comparison with a member of the next higher income group. Physical endowment, especially with fossil fuels, can influence the resulting employment effects under different scenarios. Hence, a comparison across producers of crude and processed fuels is suggested in this report.