Investigating the Impacts of Carbon Tax on Carbon Emissions and Renewable Energy Production with a Focus on Regional Development Level

Articles in Press

Document Type : Research Paper

Authors

Department of Economics, Faculty of Management and Economics, Shahid Bahonar University of Kerman, Kerman, Iran.

10.22059/ier.2025.381093.1008081

Abstract

carbon tax is a powerful tool that effectively reduces carbon emissions, affects energy consumption, and leads to climate change mitigation. We use a dynamic multi-regional computable general equilibrium model to examine the effects of imposing a carbon tax on renewable energy production, carbon emissions, and energy consumption. policy implications are examined based on the International Energy Agency's roadmap for 2050. Considering that, the other studies have not included the regional income discrepancy as a factor influencing the relationship between carbon tax and renewable energy production and carbon emissions. As such, we aggregated the regions of the world into five groups based on the World Bank classification criteria and implemented different scenarios.
The results show that carbon tax leads to a decrease in carbon emissions and an increase in the production of renewable energy in all regions. The more developed the countries are, the greater the impact of carbon tax on carbon emissions. However, we see that the impact of carbon tax on carbon emissions in low-income and lower-middle-income countries is becoming more and more pronounced in the years leading to 2050. Developed, high-income, and upper-middle-income countries are also moving towards using renewable energy at a faster rate than low-income and lower-middle-income countries. The results obtained are in line with the goal of net zero emissions for all countries. Based on the results, it is recommended that considering their specific conditions, all countries design and implement appropriate policies for clean energy transition to prevent the destructive effects of climate change.

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Iranian Economic Review

Articles in Press, Accepted Manuscript
Available Online from 01 January 2026

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