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Carbon Pricing as an Effective
Instrument of Climate Policy:
Searching for an Optimal Policy Instrument

Anil Markandya

-   Elena Claire Ricci*

University of Bath
Ikerbasque Professor, Basque
Centre for Climate Change

  University of Study Milan
Fondazione Eni Enrico Mattei

This work aims at analysing the impacts of an aviation tax in Italy and at proposing a general methodology to manage the complex effects of introducing environmental taxes. After a review of the literature and the analysis of the possible structures of the tax, its effects, at various levels, are calculated under a partialequilibrium model. These are then introduced in an Input-Output model to evaluate the impacts on the other sectors of the economy. Finally, different revenue-recycling options are discussed. We propose as an instrument of comparison the Green Taxation Matrix (GTM) that can act as a guide for policy-makers.
[JEL Classification: D57, H23, Q52, Q58]

Keywords: market-based environmental policy; carbon taxes; aviation sector; double dividend.



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*anil.markandya@bc3research.org - elena.ricci@feem.it
The authors thank the anonymous referees of Rivista di Politica Economica and the editors of the special issue for the useful comments and discussions. The ideas expressed in this paper are those of the authors and not necessarily those of the institutions they belong to.

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