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The incidence of a carbon tax - a dynamic CGE study

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  • van Heerden, Jan H.
  • Bohlmann, Heinrich

Abstract

This paper is a follow up of our 2006 paper entitled “Searching for Triple Dividends in South Africa: Fighting CO2 Pollution and Poverty while Promoting Growth”, which appeared in volume 26:2 of The Energy Journal. In that paper we used a static model of the South African economy and simulated both a carbon tax and an energy tax, as well as three possible recycling schemes, to search for the best tax-recycling combination with regard to three goals: (i) a cleaner environment, (ii) a growing economy, and (iii) a decrease in poverty. Improvement in all three of these goals would be considered as “triple dividends”. The abovementioned static study was not ideal and we have implemented a dynamic CGE model of South Africa to conduct similar research to repeat the search for triple dividends over time. In this paper, we report how to adjust a standard dynamic CGE model and database to be able to conduct energy related research. We also expand the electricity sector from one industry that produces electricity from coal to a few that produce electricity from coal, nuclear and renewables, with substitution possibilities between them. We levy taxes on energy related commodities and discuss the incidence of the tax on households and industries in South Africa.

Suggested Citation

  • van Heerden, Jan H. & Bohlmann, Heinrich, 2014. "The incidence of a carbon tax - a dynamic CGE study," Conference papers 332529, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    • Handle: RePEc:ags:pugtwp:332529
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