Skip to main content

2015-10-13 | project

An economy-wide analysis of GHG emissions tax in Ethiopia: Towards inclusive green growth

The goal of this project is to contribute to the fulfilment of the Ethiopian government’s efforts in reducing GHG emissions through cost effective instruments. It helps meet the target set in the GTP which explicitly acknowledges the role of building green economy for sustainability of growth as well as in the CRGE strategy which aims at reducing GHG emissions. 

Climate change is an emerging issue of our planet and its mitigation is increasingly being integrated into national development policies in many countries. Knowing the important role played by developing nations in fighting climate change, the government of Ethiopia launched the climate resilient green economy (CRGE) strategy for reducing  greenhouse gas (GHG) emissions while also  sustaining the recently fast and non -oil based growth in the economy.

One approach to mitigate the problem is by introducing environmental policy instruments such as emission taxes. Empirical studies in developed countries reveal that imposition of emission tax would decrease emissions significantly with no or limited adverse impact on economic growth. However, there is a paucity of such empirical studies in developing countries which help guide and inform policy interventions. Hence, the main objective of this study is to analyse the economic and environmental impacts of revenue-neutral emission tax in Ethiopia. To this end, a computable general equilibrium (CGE) model will be employed that will be calibrated on the modified 2005/06 SAM of Ethiopia.

The outcomes of this project is expected to be of high policy relevanceas it will inform both government and other stakeholders with respect to the economy wide effects of emission tax on various economic activities in general and implementation of the CRGE in particular. The research outputs will be disseminated in various ways including working papers which will eventually appear in peer-reviewed journals, research briefs and presentations at workshops.