The Policy Research Working Paper 10462 examines the potential effects of introducing a US$25/ton carbon tax in South Asian economies. The study uses the Climate Policy Assessment Tool (CPAT) to estimate the welfare co-benefits and efficiency costs of such a tax. The results suggest that the net welfare benefits are positive, amounting to 1.4 percent of GDP in 2030. The revenue from the carbon tax is estimated to be 1.3 percent of GDP in 2030, which is substantial for a region with a low tax-to-GDP ratio. The study also estimates the Keynesian multiplier effect through increased public investment and transfers to households. Overall, the study suggests that a carbon tax could have positive effects on South Asian economies.
