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Tax policy to reduce carbon emissions in south Africa

Author

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  • Devarajan, Shantayanan
  • Go, Delfin S.
  • Robinson, Sherman
  • Thierfelder, Karen

Abstract

Noting that South Africa may be one of the few African countries that could contribute to mitigating climate change, the authors explore the impact of a carbon tax relative to alternative energy taxes on economic welfare. Using a disaggregate general-equilibrium model of the South African economy, they capture the structural characteristics of the energy sector, linking a supply mix that is heavily skewed toward coal to energy use by different sectors and hence their carbon content. The authors consider a"pure"carbon tax as well as various proxy taxes such as those on energy or energy-intensive sectors like transport and basic metals, all of which achieve the same level of carbon reduction. In general, the more targeted the tax to carbon emissions, the better the welfare results. If a carbon tax is feasible, it will have the least marginal cost of abatement by a substantial amount when compared to alternative tax instruments. If a carbon tax is not feasible, a sales tax on energy inputs is the next best option. Moreover, labor market distortions such as labor market segmentation or unemployment will likely dominate the welfare and equity implications of a carbon tax for South Africa. This being the case, if South Africa were able to remove some of the distortions in the labor market, the cost of carbon taxation would be negligible. In short, the discussion of carbon taxation in South Africa can focus on considerations other than the economic welfare costs, which are likely to be quite low.

Suggested Citation

  • Devarajan, Shantayanan & Go, Delfin S. & Robinson, Sherman & Thierfelder, Karen, 2009. "Tax policy to reduce carbon emissions in south Africa," Policy Research Working Paper Series 4933, The World Bank.
  • Handle: RePEc:wbk:wbrwps:4933
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. García Benavente, José Miguel, 2016. "Impact of a carbon tax on the Chilean economy: A computable general equilibrium analysis," Energy Economics, Elsevier, vol. 57(C), pages 106-127.
    2. repec:wsi:ccexxx:v:06:y:2015:i:03:n:s2010007815500128 is not listed on IDEAS
    3. Asafu-Adjaye, John & Mahadevan, Renuka, 2013. "Implications of CO2 reduction policies for a high carbon emitting economy," Energy Economics, Elsevier, vol. 38(C), pages 32-41.
    4. repec:eee:enepol:v:108:y:2017:i:c:p:281-291 is not listed on IDEAS
    5. Abeer Elshennawy, 2011. "Is There A Triple Dividend Effect from A Tax on Fertilizer Use? A Computable General Equilibrium Approach," Working Papers 582, Economic Research Forum, revised 05 Jan 2011.
    6. Partridge, Andrew & Cloete-Beets, Leanne & Barends, Vanessa, 2015. "The Real Cost Of Going Clean: The Potential Impact Of South Africa’S 2016 Carbon Tax On Agricultural Production," Professional Agricultural Workers Journal (PAWJ), Professional Agricultural Workers Conference, vol. 3(1).
    7. Devarajan Shantayanan & Go Delfin S & Robinson Sherman & Thierfelder Karen, 2011. "Tax Policy to Reduce Carbon Emissions in a Distorted Economy: Illustrations from a South Africa CGE Model," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 11(1), pages 1-24, February.
    8. Ditya Agung Nurdianto, 2016. "Economic Impacts of a Carbon Tax in an Integrated ASEAN," EEPSEA Special and Technical Paper tp201604t5, Economy and Environment Program for Southeast Asia (EEPSEA), revised Apr 2016.
    9. Samuel Meng, 2015. "Is the agricultural industry spared from the influence of the Australian carbon tax?," Agricultural Economics, International Association of Agricultural Economists, vol. 46(1), pages 125-137, January.

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    Keywords

    Environmental Economics&Policies; Transport Economics Policy&Planning; Taxation&Subsidies; Energy Production and Transportation; Environment and Energy Efficiency;

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