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The environmental tax and subsidy reform in Mexico

Author

Listed:
  • Johanna Arlinghaus

    (OECD)

  • Kurt van Dender

    (OECD)

Abstract

In a bold policy effort, Mexico recently moved away from subsidies to transport fuels, increased tax rates on these fuels and introduced a carbon tax. This paper analyses these reforms using a broad set of criteria that consider the main practical dimensions of environmental policy design: environmental effectiveness, equity and distributional impacts, broader tax system impacts, macroeconomic effects, compliance and administration, policy process and consistency. The reforms significantly improve the extent to which the external costs of energy use are reflected in prices and increase government revenues, but, as price deregulation progresses further, more attention may need to be devoted to analysing and addressing the policies’ distributive effects. The analysis also highlights that ease of administration and collection are an important and desirable property of carbon taxes, especially in emerging market contexts.

Suggested Citation

  • Johanna Arlinghaus & Kurt van Dender, 2017. "The environmental tax and subsidy reform in Mexico," OECD Taxation Working Papers 31, OECD Publishing.
    • Handle: RePEc:oec:ctpaaa:31-en
    DOI: 10.1787/a9204f40-en
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    Cited by:

    1. Calì, Massimiliano & Cantore, Nicola & Iacovone, Leonardo & Pereira-López, Mariana & Presidente, Giorgio, 2022. "Too much energy The perverse effect of low fuel prices on firms," Journal of Environmental Economics and Management, Elsevier, vol. 111(C).
    2. Lukas Baumbach & Thomas Hickler & Rasoul Yousefpour & Marc Hanewinkel, 2023. "High economic costs of reduced carbon sinks and declining biome stability in Central American forests," Nature Communications, Nature, vol. 14(1), pages 1-11, December.
    3. Su, Chi-Wei & Yuan, Xi & Tao, Ran & Shao, Xuefeng, 2022. "Time and frequency domain connectedness analysis of the energy transformation under climate policy," Technological Forecasting and Social Change, Elsevier, vol. 184(C).
    4. Sugey de Jesús López Pérez & Xavier Vence, 2021. "When Harmful Tax Expenditure Prevails over Environmental Tax: An Assessment on the 2014 Mexican Fiscal Reform," Sustainability, MDPI, vol. 13(20), pages 1-17, October.

    More about this item

    Keywords

    carbon pricing; distributional effects; energy taxation; fossil-fuel subsidies; tax reform;
    All these keywords.

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Adoption and Costs; Distributional Effects; Employment Effects

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