Carbon Tax and its Impact on South African Households

Jessika Bohlmann, Roula Inglesi-Lotz and Heinrich Bohlmann
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Jessika Bohlmann: Department of Economics, University of Pretoria, Private Bag X20, Hatfield 0028, South Africa
Heinrich Bohlmann: Department of Economics, University of Pretoria, Private Bag X20, Hatfield 0028, South Africa

No 202248, Working Papers from University of Pretoria, Department of Economics

Abstract: This paper focuses on evaluating the economy-wide impact of a carbon tax as a policy mechanism designed to reduce GHG emissions in South Africa, with a particular focus on households. Impacts of the carbon tax are evaluated across different households, including low-income households, who are often said to be the least responsible for climate change. A dynamic CGE model of the South African economy that includes detailed tax information allowing for accurate measurement of the effects of imposing a carbon tax is used to conduct the modelling simulations. Results show that the effects of the carbon tax on economic growth are minimised when the revenue collected is recycled back into the economy. Additionally, low-income households are shown to be more affected by the carbon tax implementation compared to high-income households. The results from this study confirm that policymakers need to be careful in introducing new taxes on goods that form a large part of the consumption bundle of vulnerable households, such as energy, and have mitigation policies ready to support such households.

Keywords: CGE Modelling; Carbon Tax; Households; South Africa (search for similar items in EconPapers)
Pages: 19 pages
Date: 2022-10
New Economics Papers: this item is included in nep-cmp, nep-ene, nep-env, nep-pbe and nep-pub
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