ANNOUNCEMENTS
A growing number of policy experts believe that carbon pricing, such as taxes or emissions trading schemes, is an essential tool for helping nations fulfil their climate obligations under the Paris Agreement and reduce greenhouse gas emissions at a reasonable cost. Nonetheless, there are worries about the possible effects of enacting such laws unilaterally, especially in developing nations that must strike a balance between environmental objectives and the need for energy access, economic expansion, and the reduction of poverty. In order to provide an empirical evaluation of how such market-based emissions pricing policies may affect carbon emissions, trade competitiveness, and broader economic indicators in an emerging economy context, this thesis looks at South Africa's experience as the first developing nation to implement a national carbon tax in 2019.
The study creates a counterfactual "Synthetic South Africa" using the synthetic control approach in order to calculate the causal effect of the carbon tax policy on per capita CO2 emissions. According to the data, compared to the synthetic scenario without the carbon tax policy, South Africa's emissions were, on average, 0.47 metric tonnes per capita lower annually between 2019 and 2022. This suggests that the tax was successful in reducing emissions. Tests for placebos confirm that this drop is caused by actual policy effects rather than by chance. Overall, this thesis offers empirical support for the idea that carbon taxes with a proper design might be a useful tool for developing countries looking to reduce their carbon footprint. It offers recommendations on how to best utilise carbon pricing to reduce emissions while fulfilling developmental priorities through astute policy formation by examining South Africa's innovative experience.
Keywords: Carbon Tax, CO2 Emissions, Synthetic Control, Developing Countries, Climate Policy, South Africa
JEL Classification: P51, C5, C63, F15, Q54
