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HERO ID
6018022
Reference Type
Journal Article
Title
Poverty and distributional effects of a carbon tax in Mexico
Author(s)
Renner, S
Year
2018
Is Peer Reviewed?
Yes
Journal
Energy Policy
ISSN:
0301-4215
Publisher
Elsevier
Volume
112
Issue
Elsevier
Page Numbers
98-110
DOI
10.1016/j.enpol.2017.10.011
Web of Science Id
WOS:000416615800012
URL
https://linkinghub.elsevier.com/retrieve/pii/S0301421517306341
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Abstract
Mexico recently declared ambitious goals in reducing domestic CO2 emissions and introduced a carbon tax in 2014. Although negative effects on household welfare and related poverty measures are widely discussed as possible consequences, empirical evidence is missing. We try to fill this gap by simulating an input-output model coupled with household survey data to examine the welfare effects of different carbon tax rates over the income distribution. The currently effective tax rate is small and has negligible effects on household welfare. Higher simulated tax rates, maintaining the current tax base, show a slight progressivity but welfare losses remain moderate. Welfare losses, regressivity and poverty rise more with widening the tax base towards natural gas and the other greenhouse gases methane (CH4) and nitrous oxide (N2O) mainly through food price increases. For a complete analysis of the policy, we simulate a redistribution of calculated tax revenues and find that the resulting effects become highly progressive, also for high rates, wider tax bases and even in the absence of perfect targeting of social welfare programs.
Keywords
Carbon tax; Distributional effects; Poverty; Mexico
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