Distributional Effects of Carbon Tax in Ethiopia : A Computable General Equilibrium Analysis / Govinda R. Timilsina, Samuel Sebsibie.

Format:

Book

Author/Creator:

Timilsina, Govinda R., author.

Sebsibie, Samuel, author.

Series:

Policy research working papers.

Policy research working papers

Language:

English

Subjects (All):

Climatic changes.

Physical Description:

1 online resource.

Other Title:

Distributional Effects of Carbon Tax in Ethiopia

Place of Publication:

Washington, D.C. : The World Bank, 2023.

Summary:

Developing countries are increasingly giving attention to carbon pricing to reduce their emissions, particularly in meeting their nationally determined contribution under the Paris Climate Agreement. However, they would like to understand the potential economic, distributional, and environmental impacts of carbon pricing policies before they consider implementation. Using a computable general equilibrium model of Ethiopia, this study examines the effects of a hypothetical carbon tax (US$20/total carbon dioxide) under several alternative schemes to recycle carbon tax revenue to the economy. The study finds that a carbon tax would be regressive in all schemes considered except those when the tax revenue is recycled, as a cash transfer, to household income groups either equally or inversely proportional to their incomes. The schemes that make the carbon tax progressive also cause a higher reduction of carbon dioxide emissions, thereby ensuring the alignment of equity and environmental outcomes of the carbon tax. However, these schemes are not necessarily economically efficient because they cause higher reductions of gross domestic product compared to other options considered.

Notes:

Description based on publisher supplied metadata and other sources.

Publisher Number:

10.1596/1813-9450-10476