The Effects of Carbon taxation and Climate Financing on the Malagasy Economy: An Application using a DSGE Model

RANAIVOSON, Tojonirina Miada Zafindraibe and LAZAMANANA, Pierre Andre (2025): The Effects of Carbon taxation and Climate Financing on the Malagasy Economy: An Application using a DSGE Model.

Abstract

The massive release emission of greenhouse gases into the atmosphere, which has emerged as a pressing global concern, entails detrimental consequences for both the environment and the economic system. As a consequence, the severity of the consequences of climate change has disrupted economic issues and strategies. Major reorientations of economic policies, particularly climate policies, mainly based on CO2 emission levels have been adopted during various Conferences of the Parties (COP).This issue has therefore led us to investigate the effects of such climate policies on the economy as a whole. To achieve our objective, a climate DSGE model reflecting the characteristics of Madagascar has been implemented. The results of impulse response function reveal that dynamic carbon taxation proves more effective in reducing CO2 emissions compared to a quota policy, which is a source of volatility. Climate finance, on the other hand, is insufficient to stimulate the economy if not combined with carbon pricing.

• Item Type: MPRA Paper
• Language: English
• Keywords: Climate policies, Greenhouse gases, Carbon pricing, DSGE, Conferences of the Parties, Climate change
• Subjects: H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H23 - Externalities ; Redistributive Effects ; Environmental Taxes and Subsidies

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