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This paper studies the sectoral and macroeconomic consequences
of carbon taxes in four Nordic countries using a novel monthly
measure of effective carbon tax rates. The suggested measure
accounts for the time-varying emission coverage of taxes that are
both explicitly and implicitly levied on greenhouse gas-emitting
goods, thereby solving several issues of existing carbon tax measures
currently used by the literature. Employing the new measure in a
local projections setting, I find that carbon taxes reduce emissions
as expected but also impair macroeconomic activity – though there
is some heterogeneity in the effects across sectors and countries.
