Computable general equilibrium model for the introduction of a carbon tax for the Moroccan economy

Name: DEPF CGE model

Type: CGE
Institution: Moroccan government, with technical assistance from the World Bank

Description: A macroeconomic tool for simulating the effects of different carbon tax scenarios.

Questions to be answered/variables considered: This tool aims to determine the macroeconomic effects of various carbon tax scenarios to support Morocco’s NDC and maximize economic and societal benefits. Specifically, it aims to understand the impacts of revenue recycling options on other economic sectors (i.e., public investment, corporate tax rate, main export industries, households).

Limitations:

• The model lacks the detailed granularity of electricity sector inputs.
• It lacks disaggregation of household accounts in the social accounting matrix, limiting its ability to assess social and distributional consequences (e.g., poverty and inequality).

Assumptions:

• The model is a static neoclassical model with Walrasian general equilibrium.
• It assumes perfect competition: markets are balanced by flexible prices.
• It considers the optimizing microeconomic behavior of economic agents (made up of a representative household, companies, the government, and the rest of the world).
• The factors of production are assumed to be labor (perfectly mobile between sectors) and capital (specific to each sector).

Development:

• There is a plan to disaggregate the household account to more effectively capture social effects related to poverty and inequality.
• It is also planned to disaggregate electricity sector inputs to enable a detailed assessment of energy transition impacts.
• Transition from a static model to a dynamic model will be achieved through the introduction of sequential dynamics.
• Certain rigidities, notably in the labor market, could be considered.
• The model aims to integrate the financial sphere, particularly at market level.