Eurozone carbon tax hike would cause small GDP fall, paper finds

Raising tax to rate consistent with net zero would create only transient inflation, researchers say

European Union flags

Increasing eurozone carbon prices would cause a temporary inflation rise and a small GDP fall, a working paper published by the European Central Bank finds.

In Macroeconomic effects of carbon transition policies, a team of researchers use the ECB’s new area-wide model. Günter Coenen, Matija Lozej and Romanos Priftis incorporate a disaggregated energy sector into the model, differentiating between “clean” and “dirty” sources of power. They look at the effects of “permanent increase in carbon

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