Growth and welfare losses from carbon emissions restrictions : a general equilibrium analysis for Egypt

Abstract

This paper is an assessment for a particular country, Egypt, of the economic effects, under various conditions, of carbon emission restrictions. Like other work, it is an exemplification of some of the economic possibilities. However, it extends the domain of possibilities and suggests some issues that have not been considered in other studies. The model is used to assess the sensitivity of the results to alternative specifications: changes in the level of the restrictions, changes in timing of the restrictions, changes in the rate of discount of future welfare and the presence or absence of "alternative" technologies for power generation. Since greenhouse warming is a function of the accumulated stock of greenhouse gases in the atmosphere, a more fundamental specification for the control of greenhouse warming than the limitation of annual emissions is analyzed: constraints on the accumulated emissions of carbon dioxide. The differences between the effects in the "short run" and in the "long run" and their welfare implications are also demonstrated. It is demonstrated clearly that, while annual emissions constraints have only a modest effect on long run economic growth rates, they have a substantial effect on the achieved levels of GDP and welfare. These results do not change very much even with backstop and unconventional technologies or change in discounting. Postponing the imposition of the constraints does have a significant effect, however, as does changing the form of the constraints to one on accumulated emissions.