Most economists regard a carbon tax as the most efficient way to reduce carbon emissions. In this perspective it is interesting to consider the effect of a Scottish-specific carbon tax. It is particularly relevant given the demanding environmental targets set by the Scottish Government and the present discussions around increased fiscal autonomy.

This brief uses an energy – economy – environment model of Scotland to simulate the impact of the Scottish Government imposing such a tax on carbon emissions and the level of aggregate, and sectoral, economic activity.