The effect of cap and trade policy on the economy, welfare and renewable energy for the Moroccan case: a partial equilibrium approach

Mohamed Adib Ed-daoudi (madibeddaoudi@gmail.com) and Kenza Oubejja
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Mohamed Adib Ed-daoudi: University Mohamed 5 of Rabat
Kenza Oubejja: University Mohamed 5 of Rabat

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Abstract: In this paper, we are interested in cap-and-trade policy, or the implementation of pollution permits, as a mean to decrease CO2 emissions, which is the main cause of global warming, for the case of Morocco. To do so, we used a partial equilibrium model for the cereals market and the energy sector by simulating three scenarios of total emissions caps, namely a 1% decrease in emissions, a 5% decrease and a 7.5% decrease. We used this approach because we are concerned with one market, namely the cereals market and after designing the model wich is a system of equations capturing the interactions between fossil energy, renewable energy and cereals market, we log-linearized the model that we solved using matrix algebra with Octave. The results show that these forced emissions decreases have a very small effect on the decrease in income representing households welfare, remaining the same even in the 7.5% decrease scenario, as well as an increase in solar energy production and consumption. Therefore, a cap and trade system with a reasonnable cap will reduce emissions without affecting that much households welfare, while encouraging renewable energy production at the same time.

Keywords: Emissions Partial equilibrium model Cereals market Energy Cap and trade Renewable energies; Emissions; Partial equilibrium model; Cereals market; Energy; Cap and trade; Renewable energies (search for similar items in EconPapers)
Date: 2023-08
New Economics Papers: this item is included in nep-ara, nep-ene and nep-env
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Published in African Scientific Journal, 2023, 3 (19), ⟨10.5281/zenodo.8189017⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-04175968

DOI: 10.5281/zenodo.8189017

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