Structural vector auto-regressions (SVARs) are used to simulate US carbon taxes, treating price plus tax as exogenous. These reduce CO2 and GDP. If this fall in GDP is compensated to leave Disposable Income unchanged, the added income drives further declines in CO2, but also lower GDP....

Vector auto-regressions (VARs) are used to simulate US carbon taxes, treating price plus tax as exogenous. These reduce CO2 and GDP. If the fall in GDP is compensated by a fiscal stimulus to leave Disposable Income unchanged, the added income drives further declines in CO2, but also lower GDP....