Carbon and energy taxation for CO2 mitigation: a CGE model of the Malaysia

Masoud Yahoo, Jamal Othman

Research output: Contribution to journalArticle

5 Citations (Scopus)

Abstract

Malaysia has made a pledge to reduce voluntarily her carbon dioxide-equivalent (CO2-e) gas emission’s intensity of gross domestic product by up to 40 % based on 2005 levels by 2020. The country is considering implementing economic instruments, among others, to assist the achievement of emission reduction targets while contributing towards the nation’s energy security and sustainable development goals. This paper develops a computable general equilibrium model with explicit energy-emission linkages to appraise the economy-wide and welfare impacts of carbon and energy tax policies to reduce CO2 emissions in Malaysia. Results indicate that the negative macroeconomic impacts of carbon and energy taxes are small relative to the quantum of emission reduction. A Hicksian welfare criterion is utilized to determine the impact of revenue natural shifts in carbon and energy taxes. Revenue neutrality assumptions show that carbon taxation is the best choice when it can provide a double dividend if the generated revenue is used for the purpose of consumption subsidy on household purchases. The notion of the double dividend is confirmed when the change in the consumption structure will result in a welfare improvement, while CO2 emission is decreased effectively. The study also found that carbon tax policy results in greater emission reductions relative to energy taxes, while the use of renewable energy will increase more substantially.

Original languageEnglish
Pages (from-to)1-24
Number of pages24
JournalEnvironment, Development and Sustainability
DOIs
Publication statusAccepted/In press - 19 Nov 2015

Fingerprint

taxation
Malaysia
mitigation
energy
carbon
taxes
revenue
tax policy
welfare
welfare impact
economic instrument
pollution tax
computable general equilibrium analysis
gross domestic product
equilibrium model
neutrality
renewable energy
Co2
Carbon tax
CGE model

Keywords

  • CGE modelling
  • Energy and emission taxes
  • Environmental effects
  • Hicksian welfare
  • Malaysia
  • Sustainable development

ASJC Scopus subject areas

  • Geography, Planning and Development
  • Management, Monitoring, Policy and Law
  • Economics and Econometrics

Cite this

Carbon and energy taxation for CO2 mitigation : a CGE model of the Malaysia. / Yahoo, Masoud; Othman, Jamal.

In: Environment, Development and Sustainability, 19.11.2015, p. 1-24.

Research output: Contribution to journalArticle

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