Country Impacts of Response Measures Senegal Scott Mc

Country Impacts of Response Measures: Senegal Scott Mc. Donald, Lindsay Shutes, Karen Thierfelder & Manal Shehabi 1

Introduction & Outline • Introduction • Analytical ‘programme’ • Global response measures – West Africa Impacts • Senegal model – Senegal Impacts – SDGs • Summary 2

Introduction • Assessing impacts of the implementation of response measures: A CGE Analysis – Pilot project – Linked global-single country analysis – Senegal and Kenya • Comparative static – NO transition path – Constrained optimisation • NOT forecasts https: //unfccc. int/sites/default/files/resource/RM_case_study_Senegal_Kenya. pdf 3

Data Analytical ‘Programme’ Indicators Background Write up Define policy shocks Global data Global model Global simulation results Policy shock data World price changes Models Dissemination Country data Country modes Results indicators including SDGs Country simulation results Dissemination: policy implications & options 4

Global response measures • Global CO 2 emissions: reduced by 20% – Instruments • A 1: tax on carbon • B 1: sales tax on fossil fuels • C 1: quantity restriction • C 02 emissions (2014) – E & W Africa - < 0. 6% of global CO 2 – Africa – c 3. 2% – NAFTA – c 21% – China – c 22% – EU – c 11% • Low income countries excluded 5

Global impacts on West Africa World prices Exchange rate Local prices A 1: 20%↓ emissions, endogenous carbon tax B 1: 20%↓ emissions, C 1: 20%↓ emissions, endogenous energy input endogenous reduction in taxes input quantities Imports ↓ except, coal, mine & gas Exports ↓ 2% depreciation ↑ except oil, gas, petro ↑ except energy, livestock, transport, other manu ↓↓ except coal, mine, gas Exports ↓↓ 7. 6% depreciation ↑↑ except oil, gas ↑ except energy, livestock , transport, other manu, electricity Imports ↑↑ except agri, oil, gas Exports ↓↓↓ 5. 9% depreciation ↑↑↑ except oil ↓ 6

Senegal model specification • Closure – – – Exchange rate fixed, external balance varies Investment driven: value of investment fixed Government borrowing fixed: income tax varies Technology fixed at all production levels CPI fixed (numéraire) • Factor market functioning – All factors fully employed (long-run), returns vary – Sectoral rigidities: • Land supply fixed in regional production • Capital fixed in mining and chemicals • Shocks from global response measures – World import and export price changes – Exchange rate changes 7

Economy wide effects Percentage change or share of total commodities GDP and Trade Effects 35 A 1: carbon tax 30 B 1: energy input tax 25 C 1: input quantity 20 15 10 5 0 -5 -10 Exchange rate Nominal GDP Real imports Real exports Nominal import share export share 8

-6 Grain Oilseed Other agri Livestock Mining (oil) Food crop Meat Other food Clothing Wood/printing Petrol Fertiliser Chemicals Metal proc Other manu Electricity Construction Trade/comms Govt services Other services Commodity demand Percentage change in commodity demand 8 A 1: carbon tax Primary Manufacturing Services Primary B 1: energy input tax Manufacturing C 1: input quantity 6 4 2 0 -2 -4 Services Primary Manufacturing Services 9

La N nd gr ic ap o ita Se n-ag l m r ic is ap ki ita l Se led l m Ce is nt ki ra lle l Se d Se D m ak m is ar is ki ki lle d Ea d So st ut h Sk W ill ed est Ce Sk nt ra ill l ed D Sk aka r ill ed Sk Ea ill st Sk e d ill N ed So orth ut U h ns W ki es lle t d Ce U ns nt ki ra lle l d D U ak ns ar ki lle U d ns Ea U ki ns st l l ed ki lle N d So orth ut h W es t A Factor results Percentage change in factor returns A 1: carbon tax 6 B 1: energy input tax 4 C 1: input quantity 2 0 -2 -4 -6 -8 10

Household impacts Percentage change in household income 4 A 1: carbon tax 3 B 1: energy input tax 2 C 1: input quantity 1 0 -1 -2 -3 -4 -5 -6 -7 Rural Dakar Central North Rural South West Rural East Urban Dakar Central North Urban South West Urban East 11

Vulnerable households Household income per capita by vs. change in consumption 0, 00 2, 00 0, 10 0, 20 0, 30 0, 40 0, 50 0, 60 0, 80 0, 90 1, 00 A 1: carbon tax B 1: energy input tax 1, 00 Percentage change in household consumption 0, 70 C 1: input quantity 0, 00 -1, 00 -2, 00 -3, 00 -4, 00 -5, 00 -6, 00 -7, 00 -8, 00 Household income per capita (base) Population data from A. Mainar Causape, personal communication 12

Regression away from the Goals Progress towards the Goals Impact of Response Measures on SDGs for Senegal 13

Summary Negative impact of global response measures in Senegal: A 1 carbon tax<B 1 energy input taxes<C 1 quantity restrictions • Exchange rate depreciation – increases import & export prices except some energy products including oil • All 3 response measures reduce GDP in Senegal • Land & agricultural capital markets buffer the impact on poorer households • Household impacts: – Rural North and Rural Dakar better off under carbon tax and energy input tax due to income and consumption patterns – All other households are worse off in all simulations – Some concerning impacts on households under energy input tax and quantity restriction response measures • Mixed picture for SDGs impacts 14

Vulnerable households: Senegal & Kenya 0, 00 2, 00 1, 00 0, 20 0, 40 0, 60 0, 80 1, 00 A 1: carbon tax -1, 00 B 1: energy input tax -2, 00 C 1: input quantity -3, 00 -4, 00 -5, 00 -6, 00 -7, 00 -8, 00 15

Country Impacts of Response Measures: Senegal End 16