IDEAS home Printed from https://ideas.repec.org/p/aep/anales/4559.html
   My bibliography  Save this paper

Determinants of sectoral effective carbon rates on energy use

Author

Listed:
  • Santos Espina Mairal
  • Hildegart Ahumada
  • Fernando Navajas
  • Alejandro Rasteletti

Abstract

We extend the measurement of effective carbon rates, adapting the OECD methodology (OECD-ECR, 2019, 2021), to 18 countries in Latin America and the Caribbean (LAC) for 2018, starting from energy balances and revising comprehensively the level and structure of excises and carbon taxes across countries and accounting for specificities in the emission structure (eg biofuels) and the existence of energy subsidies, all that quite differ from OECD patterns. This allows us to build up a sample of 66 countries (which includes some Asian and African countries also captured by OECD estimates) across 6 sectors and document stylized facts about the sectoral and aggregate level and structure of carbon pricing. Such facts show a biased structure of taxation towards road transport (which has a genesis, decades ago, different from the sole objectives of carbon taxation). This motivates an econometric modelling strategy where we first account for the determinants of economy-wide effective carbon rates (ECR) and then explain differences in road transport and the rest of sectors across countries with an automatic, machine learning model selection and using large set of potential explanatory variables that cover different structural, economic and institutional dimensions. Fiscal variables such as proxies for the marginal cost of public funds are important determinants of ECR in the road transport sector, as expected from the genesis of fuel excises. Emission trading systems tend to increase the value of ECR, while the same does not happen for carbon taxes suggesting that the later are introduced in a reform that substitute for excises. We document that LAC has a lower ECR and that energy subsidies are relevant in changing results only for some countries. However, we find that LAC does not depart from the model estimated for the whole sample insofar the main determinants of ECR. The exception are ETS since these are not observed in LAC, suggesting there might be an avenue for improving ECR by the introduction of ETS in some LAC countries.

Suggested Citation

  • Santos Espina Mairal & Hildegart Ahumada & Fernando Navajas & Alejandro Rasteletti, 2022. "Determinants of sectoral effective carbon rates on energy use," Asociación Argentina de Economía Política: Working Papers 4559, Asociación Argentina de Economía Política.
    • Handle: RePEc:aep:anales:4559
    as

    Download full text from publisher

    File URL: https://aaep.org.ar/works/works2022/4559.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. P'ia Amigo & Sebasti'an Cea-Echenique & Felipe Feijoo, 2020. "An Emissions Trading System to reach NDC targets in the Chilean electric sector," Papers 2005.03843, arXiv.org.
    2. Ian W.H. Parry & Mr. Simon Black & Nate Vernon, 2021. "Still Not Getting Energy Prices Right: A Global and Country Update of Fossil Fuel Subsidies," IMF Working Papers 2021/236, International Monetary Fund.
    3. Johanna Arlinghaus, 2015. "Impacts of Carbon Prices on Indicators of Competitiveness: A Review of Empirical Findings," OECD Environment Working Papers 87, OECD Publishing.
    4. Kanbur, S. M. R. & Myles, G. D., 1992. "Policy choice and political constraints," European Journal of Political Economy, Elsevier, vol. 8(1), pages 1-29, February.
    5. Mr. David Coady & Ian W.H. Parry & Nghia-Piotr Le & Baoping Shang, 2019. "Global Fossil Fuel Subsidies Remain Large: An Update Based on Country-Level Estimates," IMF Working Papers 2019/089, International Monetary Fund.
    6. Gary S. Becker, 1983. "A Theory of Competition Among Pressure Groups for Political Influence," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 98(3), pages 371-400.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Argueyrolles, Robin & Delzeit, Ruth, 2022. "The interconnections between Fossil Fuel Subsidy Reforms and biofuels," Conference papers 333492, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    2. S. Mauricio Medinaceli Monrroy & Marcelo G. Velázquez Bilbao La Vieja, 2023. "Hydrocarbon Prices and Subsidies in Bolivia 1986 - 2025," Development Research Working Paper Series 05/2023, Institute for Advanced Development Studies.
    3. Simon Batchelor & Ed Brown & Nigel Scott & Matthew Leach & Anna Clements & Jon Leary, 2022. "Mutual Support—Modern Energy Planning Inclusive of Cooking—A Review of Research into Action in Africa and Asia since 2018," Energies, MDPI, vol. 15(16), pages 1-29, August.
    4. Persson, Torsten & Tabellini, Guido, 2002. "Political economics and public finance," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 3, chapter 24, pages 1549-1659, Elsevier.
    5. Rodrigo M. S. Moita & Claudio Paiva, 2013. "Political Price Cycles in Regulated Industries: Theory and Evidence," American Economic Journal: Economic Policy, American Economic Association, vol. 5(1), pages 94-121, February.
    6. Anders Gustafsson, 2019. "Busy doing nothing: why politicians implement inefficient policies," Constitutional Political Economy, Springer, vol. 30(3), pages 282-299, September.
    7. Bryan Caplan & Edward Stringham, 2005. "Mises, bastiat, public opinion, and public choice," Review of Political Economy, Taylor & Francis Journals, vol. 17(1), pages 79-105.
    8. Tin Cheuk Leung & Kwok Ping Ping & Kevin K. Tsui, 2019. "What can deregulators deregulate? The case of electricity," Journal of Regulatory Economics, Springer, vol. 56(1), pages 1-32, August.
    9. Hahn Robert, 2010. "Designing Smarter Regulation with Improved Benefit-Cost Analysis," Journal of Benefit-Cost Analysis, De Gruyter, vol. 1(1), pages 1-19, July.
    10. Randall S. Kroszner, 1999. "Is the Financial System Politically Independent? Perspectives on the Political Economy of Banking and Financial Regulation," CRSP working papers 492, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
    11. Fu, Tong & Jian, Ze, 2020. "A developmental state: How to allocate electricity efficiently in a developing country," Energy Policy, Elsevier, vol. 138(C).
    12. Alessandro Olper & Johan Swinnen, 2013. "Mass Media and Public Policy: Global Evidence from Agricultural Policies," The World Bank Economic Review, World Bank, vol. 27(3), pages 413-436.
    13. McShane, Michael K. & Cox, Larry A. & Butler, Richard J., 2010. "Regulatory competition and forbearance: Evidence from the life insurance industry," Journal of Banking & Finance, Elsevier, vol. 34(3), pages 522-532, March.
    14. Kosack, Stephen, 2003. "Effective Aid: How Democracy Allows Development Aid to Improve the Quality of Life," World Development, Elsevier, vol. 31(1), pages 1-22, January.
    15. Jack Hirshleifer, 1990. "The Determinants of Power," UCLA Economics Working Papers 582, UCLA Department of Economics.
    16. Rosenzweig, Mark R. & Wolpin, Kenneth I., 1984. "Externalities, Heterogeneity and the Optimal Distribution of Public Programs: Child Health and Family Planning Interventions," Bulletins 8435, University of Minnesota, Economic Development Center.
    17. Gabriella Montinola & Ramon Moreno, 2001. "The political economy of foreign bank entry and its impact: theory and a case study," Pacific Basin Working Paper Series 2001-11, Federal Reserve Bank of San Francisco.
    18. Leers, T. & Meijdam, A.C. & Verbon, H.A.A., 2001. "The Politics of Pension Reform Under Population Ageing," Other publications TiSEM bb03e411-061a-48e2-8a63-8, Tilburg University, School of Economics and Management.
    19. Francis,David C. & Kubinec ,Robert, 2022. "Beyond Political Connections : A Measurement Model Approach to Estimating Firm-levelPolitical Influence in 41 Economies," Policy Research Working Paper Series 10119, The World Bank.
    20. Boone, Peter, 1996. "Politics and the effectiveness of foreign aid," European Economic Review, Elsevier, vol. 40(2), pages 289-329, February.

    More about this item

    JEL classification:

    • Q4 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:aep:anales:4559. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Juan Manuel Quintero (email available below). General contact details of provider: https://edirc.repec.org/data/aaeppea.html .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.