Original Research

Redistributing environmental tax revenue to reduce poverty in South Africa: The cases of energy and water

JH Van Heerden, JN Blignaut, M Mabugu, R Gerlagh, S Hess, RSJ Tol, M Horridge, R Mabugu, M De Wit, T Letsoalo
South African Journal of Economic and Management Sciences | Vol 9, No 4 | a1051 | DOI: https://doi.org/10.4102/sajems.v9i4.1051 | © 2014 JH Van Heerden, JN Blignaut, M Mabugu, R Gerlagh, S Hess, RSJ Tol, M Horridge, R Mabugu, M De Wit, T Letsoalo | This work is licensed under CC Attribution 4.0
Submitted: 21 May 2014 | Published: 22 May 2014

About the author(s)

JH Van Heerden, University of Pretoria, South Africa
JN Blignaut, University of Pretoria
M Mabugu, HSRC
R Gerlagh,, Netherlands
S Hess,, Netherlands
RSJ Tol, Institute for Environmental Studies, Vrije Universiteit and Economic and Social Research Institute
M Horridge, Centre of Policy Studies, Australia
R Mabugu, Fiscal and Financial Commission
M De Wit, De Wit Sustainable Options (Pty) Ltd
T Letsoalo, National Department of Agriculture, Pretoria

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Abstract

South Africa, as an upper middle-income, resource-intensive developing country with an open economy, has to find innovative ways to combat poverty, promote economic growth and reduce the intensity of resource use, simultaneously.  One option is to explore the plausibility of achieving a double dividend by levying a tax on water and energy and recycling the revenue back to the economy by allowing for a reduction in other forms of taxation.  According to the double dividend theory it is possible, under some conditions, to achieve both environmental and economic objectives.  We investigated such a possibility in the South African economy using an integrated economy/environment CGE model and found that it is indeed possible to achieve such double dividend benefits.  Given the prevailing economic and environmental contexts, government should actively search for ways to achieve such dividends.

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