Jaafar, Abdul Hamid and Al-Amin, Abul Quasem and Siwar, Chamhuri (2008): A CGE Analysis of the Economic Impact of Output-Specific Carbon Tax on the Malaysian Economy.
Download (149kB) | Preview
Environmental pollution is an emerging issue in many developing countries and its mitigation is increasingly being integrated into national development policies. One approach to mitigate the problem is by implement pollution control policies in the form of pollution tax or clean technology incentives. Empirical studies for developed countries reveal that imposition of an carbon tax would decrease CO2 emissions significantly and do not dramatically reduce economic growth. However, the same result may not apply for small-open developing countries such as Malaysia. The objective of this study is to quantify the impact of pollution tax on the Malaysian economy under the backdrop of trade liberalization. To examine the economic impact and effectiveness of carbon tax, a single-country, static Computable General Equilibrium model for Malaysia is constructed. The model is extended to incorporate output-specific carbon tax elements. Three simulations were carried out using a Malaysian 2000 Social Accounting Matrix. The first simulation examines the impact of halving the baseline tariff and export duty while the second solely focused on the impact of output-specific carbon tax. The third simulation combines both former scenarios. The model results indicate that the Malaysian economy is not sensitive to further liberalization. The reason could be attributed to the fact that Malaysian export duty is already low. Additionally, simulation results also indicate that while imposition of carbon tax reduces carbon emission, it also results in lower GDP and trade.
|Item Type:||MPRA Paper|
|Original Title:||A CGE Analysis of the Economic Impact of Output-Specific Carbon Tax on the Malaysian Economy|
|Keywords:||Trade, Air Emission, Environmental General Equilibrium, Malaysian Economy|
|Subjects:||F - International Economics > F0 - General > F00 - General
C - Mathematical and Quantitative Methods > C6 - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling > C68 - Computable General Equilibrium Models
F - International Economics > F1 - Trade
|Depositing User:||Quasem Al-Amin|
|Date Deposited:||28. Aug 2008 09:24|
|Last Modified:||12. Feb 2013 10:17|
Abdul Hamid, Al-Amin & Chamhuri Siwar. 2008. Environmental impact of alternative fuel mix in electricity generation in Malaysia. Renewable Energy 33: 2229–2235.
Al-Amin & Chamhuri Siwar. 2006. Globalization, Economic Growth, Poverty and Environmental Degradation in Third World Countries: A Review. Proceeding of the 3rd International GSN Conference, UKM, Malaysia, 21-23 August.
Al-Amin, Chamhuri Siwar, Abdul Hamid & Nurul Huda. 2008. Globalization & Environmental Degradation: Bangladeshi Thinking as a Developing Nation by 2015. IRBRP Journal. Vol. 3 No.1 (upcoming).
Al-Amin, Chamhuri Siwar, Abdul Hamid and Nurul Huda. 2007. Globalization, Environment and Policy: Malaysia Toward a Developed Nation. (Proceeding of the 8th APSA conference, 19-21 November, Penang, Malaysia, 2007) SSRN Working Paper Series 1010565. New York, USA. Available on online: http://papers.ssrn.com
Antweiler, Werner; Brian R. Copeland & M. Scott Taylor. 2001. Is Free Trade Good for the Environment?” American Economic Review. 91(4): 877–908.
Armington, P. 1969. “A Theory of Demand for Products Distinguished by Place of Production”. IMF Staff Paper 16:159-178.
Babiker, M. H., Maskus, K.E. & Rutherford, T.F. 1997. Carbon Taxes and the Global Trading System. Paper presented at the International Energy Workshop and Energy Modeling Forum Meeting, IIASA, June 23-25.
Beghin C. J., Roland-Holst, D. & Van der Mensbrugghe, D. 2005. Trade and the Environment in General Equilibrium: Evidence from Developing Economies. Beghin, John; Roland-Holst, David; Van der Mensbrugghe, Dominique (Eds.). Springer.
Bullard, Clark W. & Herendeen, Robert A. 1975. The energy cost of goods and services. Energy Policy. 3 (4): 268-278.
Brian R. Copeland & M. Scott Taylor 2003. Trade, Growth and the Environment, NBER Working Papers, 9823.
Dervis, K., de Melo, J. & Robinson, S. 1982. General Equilibrium Models for Development Policy. Cambridge: Cambridge University Press.
DOE. 2001. Environmental Quality Report 2000.Ministry of Science technology and the environment. Putrajaya, Malaysia.
DOS. 1999. Economic Report, Various Issues. Ministry of Finance, Department of Statistics, Malaysia.
Ferraz & Young. 1999. Trade liberalization and industrial pollution in Brazil. United nations Publications, Santiago Chile.
Government of Malaysia. 2006. Ninth Malaysia Plan, 2006-2010. Economic Planning Unit, Prime Minister’s Department, Putrajaya, Malaysia.
Government of Malaysia. 2003. Eighth Malaysia Plan. Economic Planning Unit, Prime Minister’s Department, Putrajaya, Malaysia.
Han, Xiaoli and Lakshmanan, T.K. 1994. Structural Changes and Energy Consumption in the Japanese Economy 1975-85: An Input-Output Analysis. Energy Journal. 15(3): 165-188.
Herendeen, Robert A. 1978. Energy Balance of Trade in Norway, 1973. Energy Systems and Policy. 2(4): 425-432.
Herendeen, Robert A. & Bullard, Clark W. 1976. US Energy Balance of Trade, 1963-1967. Energy Systems and Policy. 1(4): 383-390.
Kakali Mukhopadhyay & Debesh Chakraborty. 2005. Is liberalization of trade good for the Environment?-Evidence from India. Asia-Pacific Development Journal. 12(1): 109-136.
Lenzen, Manfred. 1998. Primary energy and greenhouse gases embodied in Australian final consumption: an input-output analysis. Energy Policy. 26(6): 495-506.
Li, Jennifer C. 2005. Is There a Trade-Off between Trade Liberalization and Environmental Quality? A CGE Assessment on Thailand. Journal of Environment and Development. 14(2): 252-77.
Machado, G., R. Schaeffer & E. Worrell. 2001. Energy and carbon embodied in the international trade of Brazil: an input-output approach. Ecological Economics. 39(3): 409-424.
Matthew A. Cole & Robert J. R. Elliott. 2005. FDI and the Capital Intensity of ‘Dirty’ Sectors: A Missing Piece of the Pollution haven Puzzle. Review of Development Economics. 9(4): 530-548.
Matthew A. Cole & Robert J.R. Elliott. 2003. Determining the trade–environment composition effect: the role of capital, labor and environmental regulations. Journal of Environmental Economics and Management. 46:363–383.
Munksgaard, J. & K.A. Pedersen. 2001. CO2 Accounts for Open Economies: Producer or Consumer Responsibility? Energy Policy. 29(4): 327-335.
Levinson, Arik & M. Scot Taylor. 2004. Trade and Environment: Unmasking the pollution Haven Effect. NBER working paper no. W10629.
Perroni, C. & Wigle, R. M.1994. International trade and environmental quality: how important the linkages? Canadian Journal of Economics. 27 (3): 551–567.
Powell, A. and F. Gruen. 1968. “The Constant Elasticity of Transformation Production Function and Linear Supply Systems”. International Economic Review 9:315-328.
Robinson, S., Yunez-Naude, A., Hinojosa-Ojeda, R., Lewis.D. J. & Devarjan, S. 1999. From Stylized to applied models: Building multisector CGE models for policy analysis. North American Journal of Economics and Finance. 10: 5-38.
Stephenson, J. & Saha, G.P. 1980. Energy balance of trade in New Zealand. Energy Systems and Policy. 4(4): 317-326.
Strout, Alan M. 1985. Energy-intensive materials and the developing countries. Materials and Society. 9(3): 281-330.
Wier, Mette. 1998. Sources of changes in emissions from energy: a structural decomposition analysis. Economic Systems Research. 10(2): 99-112.
Wright, David J. 1974. Goods and services: an input-output analysis. Energy Policy. 2(4): 307-315.
Xing, Y. & C. Kolstad. 2000. ‘Do Lax Environmental Regulations Attract Foreign Investment.?’ Working paper No. 28-29. University of California Santa Barbara.
Wyckoff, Andrew W. & Roop, Joseph M. 1994. The embodiment of carbon in imports of manufactured products: implications for international agreements on greenhouse gas emissions. Energy Policy. 22(3): 187-194.