Recycling carbon taxes for reindustrialisation: addressing structural rigidity and financialisation in natural resource exporting countries

Guilherme Magacho, Antoine Godin, Sakir Yilmaz and Danilo Spinola

Working Paper from Agence française de développement

Abstract: Inclusion of developing and emerging countries in the low carbon transition agenda is imperative to meet climate goals, and policies should be tailored to their unique characteristics. Despite their significance, the structural specifics of these countries are frequently overlooked in low-carbon transition models. In an effort to establish an appropriate framework for such analyses, this article formulates a Structural Stock Flow Consistent (Structural SFC) model designed for open developing economies. This model categorizes production into three sectors: resource based exports, non-tradable goods and services, and other tradable sectors. While SFC models play a crucial role in emphasizing financial constraints, they frequently lack a multi-sectoral viewpoint and disregard structural specificities. Our model makes a dual contribution: (1) it offers a flexible framework capable of accommodating diverse country characteristics while balancing short-term demand with long term structural strategies, and (2) it underscores the inadequacy of relying solely on carbon pricing for economies deeply rooted in carbon-intensive sectors. By incorporating structurally distinct sectors within a genuinely monetary framework, the model enables us to comprehend the decisive role played by financial constraints arising from structural rigidities in shaping the dynamics of the low-carbon transition. Our findings show that the efficacy of carbon pricing is contingent on a country’s commercial, financial, and production structure. Furthermore, the results emphasize the significance of carbon tax recycling in preventing recessions and promoting sustainable decarbonization. This is accomplished by bolstering innovation and competitiveness in low-emission industries.

JEL-codes: Q (search for similar items in EconPapers)
Pages: 52
Date: 2024-03-01
New Economics Papers: this item is included in nep-ene and nep-env
References: Add references at CitEc
Citations:

Published in Research Papers

Downloads: (external link)
https://www.afd.fr/sites/afd/files/2024-03-12-25-4 ... ndustrialisation.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:avg:wpaper:en16516

Access Statistics for this paper

More papers in Working Paper from Agence française de développement Contact information at EDIRC.
Bibliographic data for series maintained by AFD ().