In an economy with substantial informality, a carbon tax can produce fiscal co-benefits that improve economic performance in addition to reducing carbon dioxide emissions. If the carbon tax revenues are used to cut production or labor taxes on formal firms, particularly those not in the energy...

Emissions trading with output-based allocation (OBA) of emissions allowances is gaining popularity as a means to address sectoral equity issues related to the use of market-based instruments in pollution control. Using a dynamic general equilibrium framework, this paper assesses the potential...