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Abstract

From 2016, South Africa will implement a carbon tax. The study analyzed the design of the tax and utilized a Computable General Equilibrium model to estimate the impact that the tax will have on the Agricultural Sector. The results suggest that the direct impact on the sector will be minimal; however, there are significant indirect impacts. These indirect impacts occur through the rising prices of intermediate inputs which experience more significant direct impacts of the tax. The study then dissected the indirect impacts to highlight what the key effects on the sector are likely to be. It was found that certain products will be severely hit, especially starches, dairy, sugar, fish, fruits and vegetables, meat, and forestry. While there is a key cause for concern, if the right courses of action are taken, then there is evidence to suggest that the negative impact of the shock can be significantly offset.

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