Clean energy transition, fiscal policy, and climate risks: An Environmental DSGE for Uganda
Climate change increasingly undermines Uganda’s fiscal stability by damaging infrastructure and widening deficits, threatening its economic resilience and development goals. This policy brief recommends integrating climate adaptation investments with clean energy transition strategies to balance emission reduction targets with macro-fiscal sustainability.
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Bbaale-et-al-Policy-Brief-July-2025.pdf
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Policy recommendations
- Integrate climate policy into macro-fiscal frameworks to balance emission reduction goals with fiscal sustainability.
- Prioritise using emission tax revenues to finance climate adaptation investments, particularly resilient infrastructure, which offers immediate protection to economic activity while gradually facilitating a clean energy transition.
- Complement adaptation investments with targeted clean capital subsidies, structured to minimise fiscal risks while preserving the momentum towards NDC targets.
- Extend Uganda’s macroeconomic modelling frameworks to incorporate climate risk analysis for informed fiscal and monetary policy planning.