Modeling Inclusive Green Growth and Sustainable Finance through Ecotax: The Application of the System Dynamics Model in Ethiopia
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Date
2023-06-02
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A.A.U.
Abstract
Since the introduction of climate resilient and green economy strategy, Ethiopia has developed a
series of policies to meet sustainable development goals. A significant portion of climate finance
(90%) in Ethiopia comes from grants and loans and the country only invests less than 2% of its
GDP in climate-related expenditures. This study tried to model the implications of imposing
taxes on pollution emissions on aggregate data and examine its effect on reducing pollution
emissions, enhancing sustainable economic growth and social welfare using a more holistic
approach in system dynamics. The findings showed that though imposing E cotax can have shortterm
negative effects, in the long run, it reduces pollution emissions, enhances sustainable
growth, and maintains social welfare through improved per capita income.
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Keywords
Inclusive Green growth, Ecotax, Sustainable Finance, Green Economy, System Dynamic