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Séminaire du Cired : Jules Schers (Cired - ENPC - AgroParisTech)

par Estelle Carciofi - publié le , mis à jour le

The economic impacts of carbon tax revenue recycling in South Africa in a world with labour-saving technological change

South Africa is implementing a carbon tax, but concerns about GDP growth and employment are high. Carbon tax revenue could also enhance growth though, e.g. through tax reform or investing in reducing South Africa’s shortage of high skill labour. In contrast to many existing studies for South Africa this paper takes into account labour market rigidities, next to technological rigidities. It analyses seven carbon tax revenue recycling schemes under the assumptions of persistent inequality in South Africa’s educational system and labour-saving technological change. It uses a multi-sectoral CGE model for an open economy with dual accounting of quantities and values of energy, non-perfect labour markets for three skill-segments, and household disaggregation. A detailed decomposition analysis of GDP growth is proposed to explain the mechanisms which make certain revenue recycling schemes successful. The analysis shows that only carbon tax revenue recycling which reduces real costs of production outside energy-intensive sectors leads to high GDP growth and employment. This is the case for revenue recycling through a reduction of company profit taxes in competitive markets, and for subsidies to labour, with the latter achieving the lowest CO2 intensity of GDP. Inequality is only reduced through per capita lump-sum recycling. A tax of 55 USD’13/tCO2 achieves South Africa’s Nationally Determined Commitment under the Paris Agreement, but leads to lower growth. To improve GDP growth and employment while reducing CO2 intensity, investment in skills of labour should aim at improving energy and material efficiency rather than increasing labour’s output productivity.

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