This research explores the welfare consequences of substituting carbon taxes for conventional distortionary taxes in a small open economy, using Pennsylvania as case study. A computable general equilibrium (CGE) model is developed for Pennsylvania to simulate possible outcomes when carbon taxes...

ABSTRACTSTaxes on environmental externalities have long been recognized in the economics literature as a cost-effective mechanism for reducing the costs of environmental degradation. However, in recent years there has been substantial interest in other possible benefits from environmental taxes,...