Analyzing long-term impacts of carbon tax based on the imputed price, applying the AIM/CGE model

Purpose - The purpose of this study is to analyze long-term (up to 2100) impacts of carbon tax based on the imputed price of carbon (ICT) from environmental and economic perspectives. Design/methodology/approach - ICT is an international tax with tax rates that differ among countries according to their economic levels. It is evaluated by comparing it with an internationally common carbon tax (CCT), applying the AIM/CGE [Global] model, a dynamic computable general equilibrium model. The ICT rates are determined from a certain formula and the CCT rates are set to achieve global GDP changes equal to the case of ICT. Findings - According to the results, the world CO2 abatement amount is almost the same between the two taxes. However, the economic impact on each country is different. Although the negative influence is smaller in the case of CCT in developed countries, it is smaller in the case of ICT in developing countries. Moreover, ICT narrows economic disparities among developed and developing countries further. In the light of significance of the worldwide introduction of CO2 abatement policies and avoidance of excessive economic burdens on developing countries, it is concluded that ICT is a more feasible carbon tax policy than CCT. Originality/value - Although the impacts of ICT have been analyzed from static and mid-term perspectives, understanding the long-term dynamic impacts is still essential, considering the features of the tax and possible socioeconomic and technological changes, especially in developing countries. This study proposes a new policy method that will contribute to efforts to combat climate change in the long run.