A new study forthcoming in Climate Change Economics sheds light on the question of whether the adoption of a rebated or revenue-neutral carbon tax would reduce employment levels. The abstract of the paper "Do Carbon Taxes Kill Jobs? Firm-Level Evidence from British Columbia," by Deven Azevedo, Hendrik Wolff, and Akio Yamazaki reads:
This paper investigates the employment impacts of British Columbia's revenue neutral carbon tax. Using the synthetic control method with firm-level data, we find considerable heterogeneity in employment responses to the policy. We show that firm size matters. In particular, the carbon tax had a negative impact on large emission-intensive firms, but simultaneous tax cuts and transfers increased the purchasing power of low income households, substantially benefiting small businesses in the service sector and food/clothing manufacturing. Furthermore, we find that aggregate employment was not adversely affected by the policy. Our results provide additional insight for the "job-shifting hypothesis" of revenue neutral carbon taxes.
And here is an excerpt from their discussion section:
