Policy Briefs
The Effect of a Carbon Tax on the Egyptian Economy: A General Equilibrium Analysis
No.
PB 65
Publisher
ERF
Date
November, 2021
Topic
Q. Agricultural and Natural Resource Economics, Environmental and Ecological Economics
Q5. Environmental Economics
In a nutshell
- Climate change is a reality in Egypt. Temperatures in Egypt have risen 0.34o C/Decade between 1961-2000
- Climate change is likely to aggravate water scarcity problems, reduce agricultural yields and agricultural output as parts of the Nile Delta is threatened by inundation due to sea level rise
- Implementing a carbon tax in Egypt leads to substantial reduction in carbon dioxide emissions and raises revenue for the government The effect of the carbon tax on economic growth depends on the use of the additional tax revenue.
- If the revenue is used to fund additional government consumption or cash transfers to private households, the effect is mildly contractionary
- If the revenue is used to reduce other tax rates in a way that stimulates additional investment, the carbon tax could have a positive impact on economic activity
- The carbon tax has no discernible adverse effects on the distribution of household income.
Research Fellows
Abeer Elshennawy
Professor of Economics, American University in Cairo
Authors
Dirk Willenbockel
Research Fellow at the Institute of Development...