Reducing fuel subsidy or taxing carbon? Comparing the two instruments from the economy, environment, and equity perspective for Indonesia
Reducing fuel subsidy and taxing carbon have a tendency toward reducing energy consumption and carbon emissions. However, both instruments may have differing impacts in their magnitudes of the emissions reduction and on the economy as a whole. Using INDONESIA-E3 (Economy-Equity-Environment) model, a computable general equilibrium (CGE) model which includes carbon emissions, carbon taxation, as well as, strong feature in distributional analysis, this paper compares and contrast the two instruments to find which policy is better in improving the three pillars of sustainable development: economy, equity, and the environment. The result suggests that given the same amount of government budget saving, carbon tax is relatively superior to using a fuel subsidy reduction instrument, because it can accelerate the decline in CO2 emissions with a lower cost on the economy in terms of GDP reduction with more favorable distributional effect. This has not taken into account the economic incentives it creates for the economy to be less reliant on carbon-intensive energy.
|Date of creation:||Oct 2008|
|Date of revision:||Oct 2008|
|Contact details of provider:|| Postal: Jalan Cimandiri No.6, Bandung 40115|
Web page: http://ceds.fe.unpad.ac.id
More information through EDIRC
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.:
- Peter Warr, 2006.
"The Gregory Thesis Visits the Tropics,"
Departmental Working Papers
2006-03, The Australian National University, Arndt-Corden Department of Economics.
- Yusuf, Arief Anshory, 2006.
"Constructing Indonesian Social Accounting Matrix for Distributional Analysis in the CGE Modelling Framework,"
1730, University Library of Munich, Germany.
- Arief Anshory Yusuf, 2006. "Constructing Indonesian Social Accounting Matrix for Distributional Analysis in the CGE Modelling Framework," Working Papers in Economics and Development Studies (WoPEDS) 200604, Department of Economics, Padjadjaran University, revised Nov 2006.
- Peter G. Warr, 2001. "Welfare Effects of an Export Tax: Thailand's Rice Premium," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 83(4), pages 903-920.
- Philip D. Adams & J. Mark Horridge & Brian R. Parmenter, 2000. "MMRF-GREEN: A Dynamic, Multi-Sectoral, Multi-Regional Model of Australia," Centre of Policy Studies/IMPACT Centre Working Papers op-94, Victoria University, Centre of Policy Studies/IMPACT Centre.
- Tao Kong & Arief Ramayandi, 2008. "Survey Of Recent Developments," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 44(1), pages 7-32.
When requesting a correction, please mention this item's handle: RePEc:unp:wpaper:200808. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Arief Anshory Yusuf)
If references are entirely missing, you can add them using this form.