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On the Distributional Effect of Carbon Tax in Developing Countries: The Case of Indonesia

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  • Arief Anshory Yusuf

    ()
    (Department of Economics, Padjadjaran University)

  • Budy P. Resosudarmo

    ()
    (Australian National University)

Abstract

This paper analyses the distributional impact of carbon tax in Indonesia, one of the largest carbon emitter developing countries. Using a Computable General Equilibrium (CGE) model with disaggregated households, the result suggests that in contrast to most studies from industrialised countries, the introduction of carbon tax in Indonesia is not necessarily regressive. Its structural change and resource reallocation effect, following the carbon tax, is in favor of factors endowed more proportionately by rural, and lower income households. In addition, the expenditure of lower income households, especially in rural area, are less sensitive to the prices of energy-related commodities. Revenue-recycling through uniform reduction in commodity tax rate may reduce the adverse aggregate output effect, whereas uniform lumpsum transfers may enhance the progressivity. This study demonstrates an example, that encouraging developing countries to reduce carbon emission, may not only increase the efficiency of carbon abatement globally, but also have desirable distributional implication in the developing countries themselves.

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Bibliographic Info

Paper provided by Department of Economics, Padjadjaran University in its series Working Papers in Economics and Development Studies (WoPEDS) with number 200705.

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Length: 33pages
Date of creation: May 2007
Date of revision: Aug 2007
Handle: RePEc:unp:wpaper:200705

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Keywords: Carbon Tax; Climate Change; Distribution; CGE; Indonesia;

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References

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Citations

Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. What economics can (and can't) tell us, part 1: carbon taxes
    by Hannah Ryder in DFID bloggers on 2011-07-12 12:00:00
Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
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Cited by:
  1. Emmanuel Combet & Frédéric Ghersi & Jean Charles Hourcade & Daniel Théry, 2010. "Carbon Tax and Equity : The Importance of Policy Design," Post-Print halshs-00692516, HAL.
  2. James B. Davies & Xiaojun Shi & John Whalley, 2012. "The Possibilities for Global Inequality and Poverty Reduction Using Revenues from Global Carbon Pricing," University of Western Ontario, Economic Policy Research Institute Working Papers 20127, University of Western Ontario, Economic Policy Research Institute.
  3. Arief Anshory Yusuf, 2008. "INDONESIA-E3: An Indonesian Applied General Equilibrium Model for Analyzing the Economy, Equity, and the Environment," Working Papers in Economics and Development Studies (WoPEDS), Department of Economics, Padjadjaran University 200804, Department of Economics, Padjadjaran University, revised Sep 2008.
  4. Asafu-Adjaye, John & Mahadevan, Renuka, 2013. "Implications of CO2 reduction policies for a high carbon emitting economy," Energy Economics, Elsevier, Elsevier, vol. 38(C), pages 32-41.
  5. Frédéric Ghersi & Emmanuel Combet & Jean-Charles Hourcade & Camille Thubin, 2010. "Économie d'une fiscalité carbone en France - Rapport d'étude réalisée avec le soutien de l'ADEME et de la CFDT‐IRES," Post-Print halshs-00458205, HAL.
  6. Hallegatte, Stephane & Heal, Geoffrey & Fay, Marianne & Treguer, David, 2011. "From growth to green growth -- a framework," Policy Research Working Paper Series 5872, The World Bank.
  7. Yudha Prambudia & Masaru Nakano, 2012. "Environmental Performance of East Asia Summit Countries from the Perspective of Energy Security," Sustainability, MDPI, Open Access Journal, vol. 4(12), pages 3206-3233, November.
  8. Dorothée Boccanfuso & Antonio Estache & Luc Savard, 2008. "Intra-Country Distributional Impact of Policies to Fight Climate Change: A Survey," Working Papers ECARES, ULB -- Universite Libre de Bruxelles 2008_038, ULB -- Universite Libre de Bruxelles.
  9. Dorothée Boccanfuso & Antonio Estache & Luc Savard, 2008. "Distributional impact of global warming environmental policies: A survey," Cahiers de recherche, Departement d'Economique de la Faculte d'administration à l'Universite de Sherbrooke 08-14, Departement d'Economique de la Faculte d'administration à l'Universite de Sherbrooke.
  10. repec:hal:wpaper:hal-00866410 is not listed on IDEAS
  11. Emmanuel Combet & Frédéric GHERSI & Jean Charles Hourcade, 2009. "Taxe carbone, une mesure socialement régressive ? Vrais problèmes et faux débats," CIRED Working Papers hal-00866409, HAL.
  12. Emmanuel Combet & Frédéric GHERSI & Jean Charles Hourcade & Daniel Théry, 2009. "Need a Carbon Tax be Socially Regressive ? True Challenges and Wrong Debates," CIRED Working Papers hal-00866410, HAL.
  13. repec:hal:wpaper:hal-00866409 is not listed on IDEAS
  14. Tim Callan & Sean Lyons & Sue Scott & Richard S. J. Tol & Stefano Verde, 2008. "The Distributional Implications of a Carbon Tax in Ireland," Papers, Economic and Social Research Institute (ESRI) WP250, Economic and Social Research Institute (ESRI).
  15. Anbumozhi, Venkatachalam & Bauer, Armin, 2013. "How Low-Carbon Green Growth Can Reduce Inequalities," ADBI Working Papers, Asian Development Bank Institute 420, Asian Development Bank Institute.
  16. Budy P. Resosudarmo & Frank Jotzo & Arief A. Yusuf & Ditya A. Nurdianto, 2011. "Challenges in Mitigating Greenhouse Gas Emissions: The Importance of Policies for Fossil Fuel Combustion," CCEP Working Papers, Centre for Climate Economics & Policy, Crawford School of Public Policy, The Australian National University 1108, Centre for Climate Economics & Policy, Crawford School of Public Policy, The Australian National University.
  17. Dorothee Boccanfuso & Antonio Estache & Luc Savard, 2011. "The Intra-country Distributional Impact of Policies to Fight Climate Change: A Survey," Journal of Development Studies, Taylor & Francis Journals, vol. 47(1), pages 97-117.
  18. Jan Imhof, 2012. "Fuel Exemptions, Revenue Recycling, Equity and Efficiency: Evaluating Post-Kyoto Policies for Switzerland," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), Swiss Society of Economics and Statistics (SSES), vol. 148(II), pages 197-227, June.

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