Nicolas Piluso

The paper analyzes the effects of introducing a corporate carbon tax on GDP and the effectiveness of this macroeconomic policy. The study is based on constructing a simple Keynesian model with flexible prices. It shows that the carbon tax can have a double beneficial effect on the economy in addition to its favorable effect on the environment: i.e., an increase in GDP and employment. The initial values (y = 100; C = 60; I = 18; G = 16; g(A) = 6) was used to simulate a positive shock of the carbon tax T, increasing from 1.75 to 1.9. The paper considers three different cases depending on the low (Case 1), medium (Case 2), or high (Case 3) sensitivity of the marginal propensity to consume in response to an increase in the prices of goods. In addition, case 4 is considered: stimulus policy associated with climate policy; and case 5 is: policy to increase nominal wages. The results show that the carbon tax can lead to an increase in prices. Although the tax does not excessively negatively affect consumption, it has a positive effect on GDP via the increase in green investments and the induced increase in public spending. Households are, therefore, not necessarily penalized because they benefit from the multiplier effects of the increase in public spending due to the introduction of the ecological tax. Furthermore, stimulus policy is even more effective when combined with an emissions tax.

The carbon market reform is controversial because the modalities of carbon pricing foreseen risk reducing the performance of companies and negatively affecting the economy. The objective of this paper is to show that the carbon tax can be floating and adapt to the economic situation while maintaining its ecological efficiency. Herein, Tobin’s Q model, which has become a standard in the literature for explaining the investment decision, is applied to the green investment decision. A carbon tax is introduced into the firm’s maximization program to see how carbon pricing changes the outcome of the traditional model. The model shows that green investment depends on the sum of the stock price and the carbon price, which suggests the possibility of modulating this amount according to the upward or downward trend of the stock price to avoid permanently penalizing the competitiveness of firms. The study also demonstrates how the financial market is likely to value green investments and that such investments will likely generate shareholder value through several channels. Indeed, green investments impact the firm’s turnover and the minimum income required by the shareholder. Such a modulation of the carbon tax according to the economic cycle would make reconciling ecological and economic efficiency possible.