Ethiopian Development Research Institute (EDRI) and the World Bank (WB) organised a team to examine the impact of carbon taxation on the growth of GDP and income distribution.
Researchers will analyse carbon taxation applying the Computable General Equilibrium (CGE) as a standard model. It uses economic data to estimate how an economy might react to changes in policy, technology or other external factors.
A study indicated that carbon emissions in Ethiopia come mainly from methane gas released from livestock, soil and forest degradation, fertilisers and fossil fuels such as diesel, benzene, and kerosene.
As taxing livestock and smallholder farmers is not feasible, researchers will limit their analysis to fossil fuels.
This type of taxation could be applied mainly in the cities, especially in Addis Abeba, as it would limit the use of private vehicles and encourage the use of public transportation, and alternative means.
It can significantly raise income that can be used to curb other taxes and finance the country's poverty reduction programmes.