Carbon tax, economic uncertainty and tourism: A DSGE approach

Abstract

Few studies so far accommodate the dynamics and uncertainties of the economic environment in the field of tourism impacts of climate policy. This paper analyzes the economic and environmental impacts of the carbon tax on tourism in the context of macroeconomic uncertainty integrating dynamic change, stochastic shocks and general equilibrium. This study builds a novel multi-sector dynamic stochastic general equilibrium (DSGE) model. The results show that the output and CO2 emissions vary significantly across tourism sectors in response to productivity, low-carbon technology, and carbon tax shocks. Carbon taxation offsets the positive effects of these shocks on tourism sectors; however, it exacerbates the negative effects. These effects are heterogenous in amplitude and time within tourism sectors. From the methodological perspective, this study innovatively introduces environmental quality and energy consumption into the utility function of households and production function of firms, thus improving the theoretical framework of this study. From the empirical perspective, the findings of this study could indicate the performance of tourism sectors in the real macroeconomy, which is of great reference value to observe the effects of carbon tax shocks on tourism sectors and scientifically guide tourism to realize its sustainable development.