Carbon tax effects on the poor: a SAM-based approach

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Title
Carbon tax effects on the poor: a SAM-based approach
Title of Series
Author
Chapa, Joana
Ortega Diaz, Araceli
License
CC Attribution 3.0 Unported:
You are free to use, adapt and copy, distribute and transmit the work or content in adapted or unchanged form for any legal purpose as long as the work is attributed to the author in the manner specified by the author or licensor.
DOI
Publisher
Institute of Physics (IOP)
Release Date
2017
Language
English

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Subject Area
Abstract
A SAM-based price model for Mexico is developed in order to assess the effects of the carbon tax, which was part of the fiscal reform approved in 2014. The model is formulated based on a social accounting matrix (SAM) that distinguishes households by the official poverty condition and geographical area. The main results are that the sector that includes coke, refined petroleum and nuclear fuel shows the highest price increase due to the direct impact of the carbon tax; in addition, air transport and inland transport are the most affected sectors, in an indirect manner, because both employ inputs from the former sector. Also, it is found that welfare diminishes more in the rural strata than in the urban one. In the urban area, the carbon tax is regressive: the negative impact of carbon tax on family welfare is greater on the poorest families.

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situation according to the World Meteorological Organization a special agency of the United Nations C O 2 is the anthropogenic GHG that contributes the most to radioactive forcing with 65 per cent of the total atmospheric C O 2 has risen primarily from the combustion of fossil fuels so a proposal to reduce C O 2 emissions is to apply a tax on the production of fossil fuels Mexico is ranked 12 among all countries contributing to global emissions Tax Policy in 2014 the Mexican Congress approved a fiscal reform that includes a carbon tax on C O 2 emissions from manufacturing
selling and burning fossil fuels in order to discourage activities which harm the environment improve air quality and reduce respiratory illness the justification for this tax was to internalize the social cost of the negative externalities of C O 2 emissions from fossil fuels incentive the use of clean renewable energies the carbon taxes are applied to fossil fuel sales expressed in monetary
units per liter or tons the objective in this work we developed
an assay based price model for Mexico in order to analyze the effects of a carbon tax on production costs and welfare the model permits to assess the impact on the consumer price indexes and consumption by household type classified according to poverty condition and strata sectorial
fax the carbon tax impacts directly the prices the suppliers of fossil fuels such as Coke refined petroleum and nuclear fuel and mining and quarrying in fact the petroleum products sector shows the largest price increment in contrast the mining and quarrying price
increases little because the crude oil is its main product and it is tax exempt while the coal is taxed but has a low weight in the mining gross output air inland transport electricity public administration and other non-metallic mineral sectors are impacted indirectly their prices increase because they face higher production costs since the users inputs the products sold as mining and quarrying and coke refined petroleum and nuclear fuel sectors poverty line definitions the carbon tax impact on household according to their income and consumption level there are 4 types of households in the poorest ones that after expanding all their income cannot afford the food best are called food-poor besides food if they cannot afford health schooling in transport they're classified in the poverty of capabilities beyond that if they cannot afford housing in dressing their classified as poor of patrimony otherwise they non-poor by 2014 Mexico had 55 comma decimal 1 per cent of the population living in poverty and 50 comma decimal 6 per cent of poor people in the urban stratum and 62 comma decimal 7 per cent in the rural areas carbon tax effect on the
households welfare the final impact on the consumption and welfare by household type differs according to geographical area and the rural Strada there is not a clear pattern but the households incapability poverty conditions are the most affected meanwhile in the urban straddle the carbon tax is regressive as the family's income decreases the carbon tax impact on consumption and welfare increases this is a consequence of the expenditure pattern of the households the poor family spend more than the non poor families in services and products that exhibit the largest price increment
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