11.4.1 Measures of economic costs
Chapter 2 discusses cost concepts. Here we report, where available, the prices associated with CO2 emissions, and negative or positive impacts on GDP, welfare and employment.
The TAR reviewed studies of climate policy interactions with the existing tax system. These interactions change the aggregate impact of a climate policy by changing the costs associated with taxes in other markets. They also point to the opportunity for climate policy – through carbon taxes or auctioned permits – to generate government revenue and, in turn, to reduce other taxes and their associated burden. The TAR pointed to this opportunity as a way to reduce climate policy costs. Since the TAR, additional studies have extended the debate (Bach et al., 2002; Roson, 2003). Meanwhile, such arguments have been the basis of the UK Climate Change Levy and linked reduction in National Insurance Contributions, small auctions under the EU ETS and US NOx Budget Program, large proposed auctions under the Regional Greenhouse Gas Initiative in the United States, and proposals in the United States, Japan, and New Zealand for carbon taxes.