On the distributional impact of a carbon tax in developing countries: the case of Indonesia

Arief A Yusuf, Budy Resosudarmo

    Research output: Contribution to journalArticle

    Abstract

    This paper, using a computable general equilibrium model with highly disaggregated household groups, analyses the distributional impact of a carbon tax in a developing economy. Indonesia, one of the largest carbon emitters among developing countries, is utilized as a case study in this paper. The result suggests that, in contrast to most industrialised country studies, the introduction of a carbon tax in Indonesia is not necessarily regressive. The structural change and resource reallocation effect of a carbon tax is in favour of factors endowed more proportionately by rural and lower income households. In addition, the expenditure of lower income households, especially in rural areas, is less sensitive to the price of energy-related commodities. Revenue-recycling through a uniform reduction in the commodity tax rate may reduce the adverse aggregate output effect, whereas uniform lump-sum transfers may enhance progressivity.
    Original languageEnglish
    Pages (from-to)131-156
    JournalEnvironmental Economics and Policy Studies
    Volume17
    Issue number1
    DOIs
    Publication statusPublished - 2015

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