ECONOMIC EFFECTS OF CARBON EMISSION TAX: A COMPUTABLE GENERAL EQUILIBRIUM ANALYSIS FOR SINGAPORE

Abstract

In this paper, a computable general equilibrium model is constructed for Singapore economy to analyze the impact of carbon tax policy on sectoral output change and distributional effect of household income. Empirical results based on macroeconomic data in 2007 suggest that carbon emission reduction can be achieved without major negative macroeconomic impact. If proper recycling channel is designed to re-invest the carbon tax revenue into the economy, instead of contraction the economy is able to maintain modest growth. These results also show energy-intensive sectors and higher income household are impacted the most.