In 2009 a joint venture of six research institutes and universities funded by the Anglo-German Foundation, modeled the economic effects of a tax on carbon. The scenarios also included a tax on resource use of 5% of total prices in 2010 increasing to 15% by 2020. Some scenarios included the ‘recycling’ of carbon tax revenues by lowering taxes on labour.

The research demonstrates that Europe can meet a 30% carbon emission reduction by introducing a carbon tax of 25% of EU prices in 2020, with hardly any impact on GDP and a positive effect on employment rates.

To investigate the impacts of an Environmental Tax Reform (ETR) for Europe six separate scenarios have been designed and tested to understand a variety of tax reform options. The results regarding employment and CO2 reduction are best in scenario S3H, where they designed ETR with revenue recycling designed to meet cooperation EU 2020 30% greenhouse gas reduction target and with a high oil prices. This scenario would decrease the global amount of materials extracted by 5.3% and the amount of CO2 emissions by 15.6% compared to the baseline scenario in 2020. Moreover the results show the most positive employment effects and when compared to the other scenarios only small negative impacts on GDP.

From: Bleischwitz, Raimund, Welfens, Paul J. J. , Zhang, ZhongXiang (eds.) (2011) International Economics of Resource Efficiency. Eco-Innovation Policies for a Green Economy. Physica-Verlag, Heidelberg.