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

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Author Info
Arief Anshory Yusuf () (Department of Economics, Padjadjaran University)
Budy P. Resosudarmo () (Australian National University)

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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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File URL: http://www.equitablepolicy.org/wpaper/200705.pdf
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Publisher 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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Related research
Keywords: Carbon Tax; Climate Change; Distribution; CGE; Indonesia;

Other versions of this item:

Find related papers by JEL classification:
D30 - Microeconomics - - Distribution - - - General
D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General
Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters
Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounting
Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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References listed on IDEAS
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Dorothée Boccanfuso & Antonio Estache & Luc Savard, 2008. "Intra-Country Distributional Impact of Policies to Fight Climate Change: A Survey," ECARES Working Papers 2008_038, Université Libre de Bruxelles, Ecares. [Downloadable!]
  2. Dorothée Boccanfuso & Antonio Estache & Luc Savard, 2008. "Distributional impact of global warming environmental policies: A survey," Cahiers de recherche 08-14, Departement d'Economique de la Faculte d'administration à l'Universite de Sherbrooke. [Downloadable!]
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