Impact of the Carbon Tax on the Transport Sector on the Moroccan Economy: Insights From a Dynamic CGEM

Abstract

Morocco is committed to a policy of decarbonization in the various sectors whose production is intensive in greenhouse gas (GHG) emissions, such as transportation. The impact of this policy on this sector is very significant, given its cross-cutting nature in relation to all other sectors. This article assesses the socio-economic and environmental impact of a carbon tax on the Moroccan transport sector, using a computable general equilibrium model (CGEM) and considering two scenarios. The first earmarks all additional tax revenues for the state budget. The second earmarks 25% of these revenues to support carriers' production costs. Carbon taxation would negatively affect the transport sector, which is strongly connected to other sectors of the economy. But the support measure would transform the environmental challenge into an economic opportunity. In fact, GHG emissions will be significantly reduced, and the volume of transport service consumption will fall in the first scenario, fading out until it becomes slightly positive thanks to the reallocation of resources. The sector's value added would deteriorate without support, but would improve with reallocation, and employment would fall, although reallocation would boost it. Lastly, the impact on GDP would be positive in both scenarios and would be slightly greater thanks to the support measure.