Carbon pricing has been recognized not only as the most efficient economic policy instruments to internalize the social cost of emissions, but also as a major tool to generate public revenues that can be used to offset the potential adverse distributional effects of climate policy. However, in many developing countries, there is a widespread reluctance to commit to climate policy, largely due to financial constraints, a lack of public support, and concern over its regressive effects.This paper makes recommendations towards the design of an effective carbon pricing system that not only discourages air pollution but also encourages the gradual uptake of climate-friendly technologies by the private sector in Nigeria’s oil and gas sector, while supporting public investment in sustainable infrastructures and projects that offset the distributional effect of the climate policy.
Discussion Papers & Case Study
July 7, 2017
Climate Policy and Finance: Designing an Effective Carbon Pricing System for Nigeria’s Oil and Gas Sector
Carbon pricing has been recognized not only as the most efficient economic policy instruments to internalize the social cost of emissions, but also as a major tool to generate public revenues that can be used to offset the potential adverse distributional effects of climate policy. However, in many developing countries, there is a widespread reluctance […]
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Nigeria Economic Update (Issue 23)
Recent Data on Nigerias Real GDP growth rate (Year-on-Year)
declined by 2.47 percentage points, from 2.11 per cent in 2015Q4 to -0.36
percent in 2016Q11. This is the lowest GDP growth rate since 2004Q2
(-0.81 percent). The Oil sector continued to contract, as -1.89 percent growth
was recorded in 2016Q1. The negative growth witnessed in the oil sector was
likely driven by the fall in global oil prices by $9.732 and decline
in domestic crude oil production, relative to preceding quarter. Similarly, the
Non-oil sector witnessed a negative growth as it declined by 3.32 percentage
points from 3.14 percent in 2015 Q4 to -0.18 percent in 2016Q1. The underperformance in the non-oil sector was
driven by significant contractions in financial (by 17.69 percent), manufacturing
(by 8.77 percent), and real estate (by 5.48 percent) sub-sectors. Given that
the present economic fundamentals point to a likely recession in 2016Q2, the
government can stir economic activities by speeding up the budget
implementation process to spur growth in the non-oil sector and the economy at
large. More so, the domestic production shock in the oil sector needs to be
addressed to effectively leverage on the present marginal rise in crude oil
prices.