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 NO_x 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.