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Education quality, green technology, and the economic impact of carbon pricing

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Carbon pricing is among the most prominent policy instruments being used or considered by governments to reduce emissions today. Proponents argue that carbon pricing may allow us to reach internationally accepted temperature targets at minimal cost (Borissov et al. 2019, Gollier and Tirole 2015, Rausch et al. 2011).

However, most studies suggest that carbon taxes will negatively affect output and could be regressive (Grainger and Kolstad 2010, Mathur and Morris 2014, van der Ploeg et al. 2021), though some emerging empirical studies challenge this (e.g. Klenert and Hepburn 2018, Metcalf and Stock 2020, Shapiro 2021). Mitigating factors that can reduce output losses or reduce rising inequality have received substantial attention in the literature, particularly the mechanism for redistributing carbon-tax revenue.

What has received less attention is the mitigating role of policies that promote education quality. Better quality education has the potential to (1) improve the supply skills needed to enable green technological innovation in response to carbon pricing, leading to lower output losses and higher reductions in carbon emissions; and (2) reduce inequality resulting from carbon pricing by ensuring that ‘green’ skill acquisition is accessible to all.

Emerging research suggests that green technological change relies on human capital. For example, the role […]

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