Exploring Carbon Pricing in Developing Countries : A Macroeconomic Analysis in Ethiopia
This study uses a computable general equilibrium model to analyze various policy scenarios for a carbon tax on greenhouse gas emissions from petroleum fuels and kerosene in Ethiopia. The carbon tax starts at $5 per ton of carbon dioxide in 2018 and...
| Main Authors: | , , , , |
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| Format: | Working Paper |
| Language: | English |
| Published: |
World Bank, Washington, DC
2019
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/536761558371853162/Exploring-Carbon-Pricing-in-Developing-Countries-A-Macroeconomic-Analysis-in-Ethiopia http://hdl.handle.net/10986/31738 |
| Summary: | This study uses a computable general
equilibrium model to analyze various policy scenarios for a
carbon tax on greenhouse gas emissions from petroleum fuels
and kerosene in Ethiopia. The carbon tax starts at $5 per
ton of carbon dioxide in 2018 and rises to $30 per ton in
2030. Different scenarios examine the impacts with revenue
recycling through a uniform sales tax reduction, reduction
of labor income tax, reduction of business income tax,
direct transfer back to households, and use by the
government to reduce debt. Because petroleum fuels and
kerosene are a relatively small part of the Ethiopian
economy, the carbon tax has quite small impacts on overall
economic activity while having a notable proportionate
impact on greenhouse gas emissions from these energy
sources, depending on the recycling scenario. The carbon tax
can raise significant revenue -- up to $800 million per year
by 2030. The impacts on the poor through increased cost of
living are not that large, since the share of the poor in
total use of petroleum fuels and kerosene is small. In terms
of income effects through employment changes, urban
households tend to experience more impacts than rural
households, but the results also depend on the household
skill level and the revenue recycling scenario. |
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