ECONOMY-WIDE ESTIMATES OF THE IMPLICATIONS OF INDC POLICIES FOR ETHIOPIA (A RECURSIVE DYNAMIC CGE MICRO-DATA ANALYSIS)

Autor/Urheber	T.W. Wassie
Titel	ECONOMY-WIDE ESTIMATES OF THE IMPLICATIONS OF INDC POLICIES FOR ETHIOPIA (A RECURSIVE DYNAMIC CGE MICRO-DATA ANALYSIS)
Quelle	Università degli Studi di Milano (2018) PDF als Volltext kostenfreie Datei
Sprache	englisch
Dokumenttyp	online; Monographie
Schlagwörter	Emission; carbon tax; Simulation; INDC; baseline; climate change; economy; environment; CGE Model; expenditure; poverty; inequality; welfare; Ethiopia; Settore SECS-P/02 - Politica Economica
Abstract	Economic and Environmental Effects of INDC Policies for Ethiopia (A Recursive Dynamic CGE Analysis) Mitigation of climate change has become unavoidable discussion item in policy making agendas in both developed and developing counties. Having understood the important role played by developing nations in fighting against climate change, Ethiopia submitted its Intended Nationally Determined Contributions (INDC) to the UNFCCC secretariat with an emission reduction goal of 64% in 2030 compared to the BAU scenario. The main objective of this study is to analyse the economic and environmental effects of the implementation of Ethiopia's INDC policy in the form of carbon tax. In doing so, a recursive dynamic computable general equilibrium (CGE) model is employed and is calibrated on the updated 2009/10 SAM of Ethiopia with the corresponding emission data of the same year. Four simulation scenarios have been introduced. In the first simulation, carbon tax revenue has been allocated entirely for government consumption, whereas in the second simulation, the carbon tax revenue has been equally divided between government consumption and households in form of lump sum transfer. In the third and fourth simulations, productivity gains from government expenditure allocated to health and education sectors are combined with the respective first two simulations. The results of simulation experiments on selected macroeconomic variables indicate that, in real terms, GDP, national absorption and household consumption are found to be adversely affected relative to the baseline scenario, the impact being considerably high in the first simulation. The simulations with productivity gains, in relative sense, have improved the negative effects of the carbon tax abatement policy on the economic variables. The implication of this is that policies that increase productivity of government expenditure have better spillover effects on GDP than those of household consumption. Finally, to achieve the emission reduction target set out in the INDC policy of Ethiopia with reasonable cost to the economy, the country has to invest in clean technologies that are meant to improve emission efficiency as most of the emissions emanate from activities in the agricultural sector, and for this end, huge international support is required. ; The Poverty, Distributional and Welfare Implications of INDC Policies for Ethiopia Environmental policies relying on market-based instruments, primarily carbon taxes, are becoming more advocated to mitigate the ever increasing GHG emissions, due to their efficiency properties. However the equity implications of such policies, the impacts on poverty, on wealth distribution, and on the prospects for growth are equally important. This is particularly true for developing countries whose primary aim is to improve upon weak economic and social performances. Ethiopia submitted its Intended Nationally Determined Contributions (INDC) to the UNFCCC secretariat with an emission reduction goal of 64% in 2030 compared to the BAU scenario. At the same time, the country is committed to reducing poverty and attaining its middle income status by 2025. As such, this study aims at analyzing the poverty, distributional and welfare consequences the implementation of Ethiopia's INDC policy in the form of carbon tax. To this end, the results from percentage changes in household consumption expenditure from the CGE model are linked to the 2010/11Ethiopian household expenditure and consumption survey micro data which covers 27,835 households (CSA 2011). In accordance with the CGE simulations four scenarios have been considered. The first represents the implementation of a carbon tax where the revenues are entirely absorbed by government expenditure. The second represents the implementation of the carbon tax with lump sum transfer of 50% of the tax revenue to households. The third and fourth simulations add government expenditure induced productivity gains (in education and health) to the first and second simulations respectively. We found that INDC policy for Ethiopia would be costly to households under the first and third simulations. With the second and fourth simulations, we found sensible results whereby an improvement in poverty; inequality and welfare have been observed. The urban poor have benefited more from both the compensation plan and productivity gains than the rural non-poor. More importantly, compensation to households is more equitable than allocating the carbon tax revenue for government expenditure. The results suggest that compensation of carbon tax revenue transfers should be structured such that the rural poor are more beneficiary as they are much larger in number and they are more affected by the carbon tax policy. Lastly, a huge international support is required to help the country achieve its emission reduction target at modest Poverty, welfare and distributional costs. Emission; carbon tax; INDC; poverty; inequality; welfare; Simulation; baseline; expenditure; Ethiopia
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