Advanced Search
MyIDEAS: Login

Distributional effects of carbon taxes: The case of Mexico

Contents:

Author Info

  • Gonzalez, Fidel

Abstract

In this study, I develop an analytical general equilibrium model to assess the distributional effects across income groups of a carbon tax assuming that the revenue from the carbon tax is recycled in two different ways: as a manufacturing tax-cut and a food subsidy. I use this analytical model to provide intuition about the main distributional components. The model is calibrated with data from Mexico to obtain unambiguous price and quantity changes. I find that the distribution of the costs is driven by the way the revenue is recycled. In particular, the costs are distributed regressively when the revenue is recycled as a manufacturing tax cut and progressively when it is recycled as a food subsidy. Providing a food subsidy also generates higher welfare and lower carbon emissions than the manufacturing tax cut. To compare and test the robustness of the numerical findings for Mexico, I calibrate the model with data for a developed country, specifically the U.S.A. Despite differences in the magnitude of the changes in some variables, the general findings mentioned above also hold for U.S.A. data. These results suggest that, as found for the U.S.A. in recent studies, carbon taxes are not necessarily regressive. Rather, the way revenue is recycled is a major determinant of how the carbon tax costs are distributed.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.sciencedirect.com/science/article/pii/S0140988312000515
Download Restriction: Full text for ScienceDirect subscribers only

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Bibliographic Info

Article provided by Elsevier in its journal Energy Economics.

Volume (Year): 34 (2012)
Issue (Month): 6 ()
Pages: 2102-2115

as in new window
Handle: RePEc:eee:eneeco:v:34:y:2012:i:6:p:2102-2115

Contact details of provider:
Web page: http://www.elsevier.com/locate/eneco

Related research

Keywords: Carbon tax; Incidence; Developing countries; Income distribution; General equilibrium;

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Deaton,Angus & Muellbauer,John, 1980. "Economics and Consumer Behavior," Cambridge Books, Cambridge University Press, number 9780521296762, October.
  2. Jorgenson, D.W. & Slesnick, D. & Wilcoxen, P.J., 1992. "Carbon Taxes and Economic Welfare," Harvard Institute of Economic Research Working Papers 1589, Harvard - Institute of Economic Research.
  3. Leonard P. Gianessi & Henry M. Peskin, 1980. "The Distribution of the Costs of Federal Water Pollution Control Policy," Land Economics, University of Wisconsin Press, vol. 56(1), pages 85-102.
  4. Parry, Ian W. H., 2004. "Are emissions permits regressive?," Journal of Environmental Economics and Management, Elsevier, vol. 47(2), pages 364-387, March.
  5. Shah, Anwar & Larsen, Bjorn, 1992. "Carbon taxes, the greenhouse effect, and developing countries," Policy Research Working Paper Series 957, The World Bank.
  6. Metcalf, Gilbert E., 1999. "A Distributional Analysis of Green Tax Reforms," National Tax Journal, National Tax Association, vol. 52(n. 4), pages 655-82, December.
  7. Gilbert E. Metcalf, 2000. "Environmental Levies and Distortionary Taxation: Pigou, Taxation, and Pollution," Discussion Papers Series, Department of Economics, Tufts University 0004, Department of Economics, Tufts University.
  8. Kevin A. Hasset & Aparna Mathur & Gilbert Metcalf, 2007. "The Incidence of a U.S. Carbon Tax: A Lifetime and Regional Analysis," Discussion Papers Series, Department of Economics, Tufts University 0714, Department of Economics, Tufts University.
  9. Lawrence H. Goulder, 1998. "Environmental Policy Making in a Second-Best Setting," Journal of Applied Economics, Universidad del CEMA, vol. 0, pages 279-328, November.
  10. A. Lans Bovenberg & Lawrence H. Goulder, 2001. "Environmental Taxation and Regulation," NBER Working Papers 8458, National Bureau of Economic Research, Inc.
  11. Burtraw, Dallas & Sweeney, Richard & Walls, Margaret, 2009. "The Incidence of U.S. Climate Policy: Alternative Uses of Revenues from a Cap-and-Trade Auction," Discussion Papers dp-09-17-rev, Resources For the Future.
  12. Bovenberg, A.L. & Mooij, R.A. de, 1994. "Environmental levies and distortionary taxation," Open Access publications from Tilburg University urn:nbn:nl:ui:12-152985, Tilburg University.
  13. Burtraw, Dallas & Sweeney, Richard & Walls, Margaret, 2009. "The Incidence of U.S. Climate Policy: Alternative Uses of Revenues from a Cap-and-Trade Auction," National Tax Journal, National Tax Association, vol. 62(3), pages 497-518, September.
  14. Gilbert E. Metcalf & Sergey Paltsev & John Reilly & Henry Jacoby & Jennifer F. Holak, 2008. "Analysis of U.S. Greenhouse Gas Tax Proposals," NBER Working Papers 13980, National Bureau of Economic Research, Inc.
  15. Walls, Margaret & Hanson, Jean, 1999. "Distributional Aspects of an Environmental Tax Shift: The Case of Motor Vehicle Emissions Taxes," National Tax Journal, National Tax Association, vol. 52(n. 1), pages 53-65, March.
  16. Gilbert E. Metcalf, 2008. "Designing A Carbon Tax to Reduce U.S. Greenhouse Gas Emissions," NBER Working Papers 14375, National Bureau of Economic Research, Inc.
  17. West, Sarah E. & Williams, R.C.Roberton III, 2004. "Estimates from a consumer demand system: implications for the incidence of environmental taxes," Journal of Environmental Economics and Management, Elsevier, vol. 47(3), pages 535-558, May.
  18. Seale, James L., Jr. & Regmi, Anita & Bernstein, Jason, 2003. "International Evidence On Food Consumption Patterns," Technical Bulletins 33580, United States Department of Agriculture, Economic Research Service.
  19. Don Fullerton & Garth Heutel, 2005. "The General Equilibrium Incidence of Environmental Taxes," NBER Working Papers 11311, National Bureau of Economic Research, Inc.
  20. Espey, Molly, 1998. "Gasoline demand revisited: an international meta-analysis of elasticities," Energy Economics, Elsevier, vol. 20(3), pages 273-295, June.
  21. James M. Poterba, 1991. "Tax Policy to Combat Global Warming: On Designing a Carbon Tax," NBER Working Papers 3649, National Bureau of Economic Research, Inc.
  22. Harrison, David Jr. & Rubinfeld, Daniel L., 1978. "The distribution of benefits from improvements in urban air quality," Journal of Environmental Economics and Management, Elsevier, vol. 5(4), pages 313-332, December.
  23. Bovenberg, A Lans & de Mooij, Ruud A, 1997. "Environmental Levies and Distortionary Taxation: Reply," American Economic Review, American Economic Association, vol. 87(1), pages 252-53, March.
  24. Lawrence Goulder, 1995. "Environmental taxation and the double dividend: A reader's guide," International Tax and Public Finance, Springer, vol. 2(2), pages 157-183, August.
  25. Decoster, Andre & Schokkaert, Erik, 1990. "Tax reform results with different demand systems," Journal of Public Economics, Elsevier, vol. 41(3), pages 277-296, April.
  26. Molly Espey, 1996. "Explaining the Variation in Elasticity Estimates of Gasoline Demand in the United States: A Meta-Analysis," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3), pages 49-60.
  27. Parry Ian W. H., 1995. "Pollution Taxes and Revenue Recycling," Journal of Environmental Economics and Management, Elsevier, vol. 29(3), pages S64-S77, November.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Xaquín Garcia-Muros & Mercedes Burguillo & Mikel Gonzalez-Eguino & Desiderio Romero-Jordán, 2014. "Local air pollution and global climate change taxes: a distributional analysis," Working Papers 2014-01, BC3.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:eee:eneeco:v:34:y:2012:i:6:p:2102-2115. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.