Introducing carbon tax in Italy: Is there room for a quadruple-dividend effect?

This study aims to contribute to the literature on the environmental effectiveness and societal impacts of carbon tax. As a case study, we select Italy where this policy is absent although often debated in the parliamentary arena. We run numerical simulations, based on an extension of the EUROGREEN macro-system dynamic model (D’Alessandro et al., 2020) to evaluate the possible threat and advantages of this policy tool from 2010 to 2050. We follow a sequential scenario strategy: first, we build a baseline that includes the Italian Energetic Plan (PNIEC), then we introduce carbon tax which amount increases over time. On top of that, we test two hypotheses regarding possible adaptive behaviours from both the consumer and firm sides. We investigate whether a ``quadruple-dividend'' effect can be achieved, by evaluating the long-term impacts on GDP and unemployment, public indebtedness, carbon emissions, and income inequality. Scenario outcomes suggest that the carbon tax i) has mild effects in curbing emission if compared with the PNIEC, ii) generates revenues capable to contrast regressive effects if redistributed to low-income households, and iii) ensures a quadruple-dividend effect only in the case of consumer and firms’ adaptive behaviour. We argue that Italy could benefit from the introduction of carbon tax. We also discuss the necessity to combine top-down policies with other public interventions to boost bottom-up adaptive strategies. This joint process could make environmental taxation more acceptable and facilitate a fairer sustainable energy transition.This work has been developed under the LOCOMOTION H2020 project (https://www.locomotion-h2020.eu/), funded by the European Union's Horizon 2020 research and innovation programme under grant agreements no 821105