Simulation of green taxation, energy consumption and human development using the computable general equilibrium (CGE) approach

Purpose Rising energy consumption and pollution have created significant environmental challenges for governments, who respond by adopting policies such as green taxation, an economically efficient tool to combat issues such as air pollution. Therefore, the purpose of this study is to investigate the relationship between green taxes, energy consumption and human development. Design/methodology/approach This study examines the impact of green taxation under various scenarios (baseline, 5%, 10% and 20%) on fossil energy consumption, greenhouse gas emissions and human development using a computable general equilibrium model. The model calibration was conducted using the 2010 social accounting matrix. Findings The results indicated that with an increase in the tax rate on fossil energy consumption, a positive one-standard-deviation shock (1%) in gross domestic product (GDP) mitigates the trend of increasing fossil fuel consumption. Conversely, in the different green tax rate scenarios, if a positive shock of one standard deviation (1%) occurs in GDP, human development initially declines and then increases. Ultimately, as the tax rate on fossil energy consumption rises, a positive one-standard-deviation shock (1%) in GDP leads to a curtailment of pollutant emissions. Originality/value Based on the results obtained from this research, it can be stated that the optimal green tax rate that can be set lies between 5% and 10%, positively influencing economic growth and human development, reducing fossil fuel consumption and decreasing pollutant emissions.