The dividends from a revenue neutral tax on coal in South Africa

Abstract

South Africa is endowed with a significant proportion of the world's coal reserves, which is used relatively cheaply to supply in more than 75 per cent of the country's energy needs. In terms of its per capita South Africa is one of the largest air polluters in the world. Even higher on the list of social preferences in South Africa, however, is the problem of unemployment, which also ranks amongst the highest in the world. In this paper we use a Computable General Equilibrium (CGE) model to simulate fiscal policy scenarios that address both these problems, and try to establish a "double dividend", namely a reduction in CO2 levels of pollution as well as a reduction in unemployment levels.