A general equilibrium analysis of the effects of carbon emission restrictions on economic growth in a developing country

Abstract

A general equilibrium approach, in the form of a multisector, intertemporal programming model, is used to analyze the effects on the growth of the Egyptian economy of carbon emissions constraints that differ across sectors and over time. The model embodies significant substitution possibilities among factors, including fuels. It is found that any substantial reduction in the rate of emissions has correspondingly important impacts on economic growth. The abatement of carbon emissions would, therefore, create major economic problems. Economy-wide constraints are, however, less restrictive than the same level of constraints imposed on particular sectors.