Sebastian Renner / Jann Lay / Hannes Greve

Household Welfare and CO2 Emission Impacts of Energy and Carbon Taxes in Mexico

GIGA Working Paper, No. 301, April 2017

We analyse the effects of environmental taxes on welfare and carbon emissions at the household level for the case of Mexico. The integrated welfare‐environmental analysis, which is based on a censored energy consumer demand system, extends previous work in two ways. First, the estimation of a full matrix of substitution elasticities allows us to test the necessity of incorporating second‐order effects into the welfare analysis. Second, the substitution elasticities derived from the demand system are used to estimate the shortrun CO2 emission‐reduction potential. We find that first‐order approximations of welfare effects provide reasonable estimates, particularly for carbon taxes. Analog to evidence in other low‐ and middle‐income countries, the taxation of all energy items is found to be regressive, with the exception of motor fuels. The inclusion of CH4 and N2O in a carbon tax regime comes with particularly regressive impacts because of its strong effects on food prices. The analysis of the emission implications of different tax scenarios indicates that short‐run emission reductions at the household level can be substantial – though the effects depend on how revenue is recycled. This effectiveness combined with moderate and manageable adverse distributional impacts renders the carbon tax a preferred mitigation instrument. Considering the large effect of food price increases on poverty and the limited additional emission‐saving potential, the inclusion of CH4 and N2O in a carbon tax regime is not advisable.

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Sebastian Renner ist wissenschaftlicher Mitarbeiter an der Universität Göttingen und Research Fellow am GIGA German Institute of Global and Area Studies. Seine Forschungsinteressen liegen im Querschnittsbereich von Umwelt- und Entwicklungsfragen wie der Messung von Armut, der Verteilungswirkungen von Klimapolitik und der ökologisch-ökonomischen Zielkonflikte von wirtschaftlicher Entwicklung.

Apl. Prof. Dr. Jann Lay

Komm. Direktor des GIGA Institut für Afrika-Studien
Leitung FSP 3

Apl. Prof. Dr. Jann Lay ist Außerplanmäßiger Professor an der Universität Göttingen, Leiter des GIGA Forschungsschwerpunktes 3 „Wachstum und Entwicklung“ und kommissarischer Direktor des GIGA Instituts für Afrika-Studien. Seine Forschungsinteressen beinhalten die Wohlfahrtseffekte von kommerzieller landwirtschaftlicher Expansion in Entwicklungsländern, die Armuts- und Verteilungswirkungen von ökonomischen Reformen und Fragen der Energie-, Klima- und Entwicklungspolitik.

Hannes Greve

Research Fellow / Doctoral Student

Hannes Greve ist Research Fellow am GIGA Institut für Afrika-Studien und Doktorand an der Universität Göttingen.

Aktuelle Publikationen der AutorInnen

Daniel Neff / Cornelis W. Haasnoot / Kunal Sen / Sebastian Renner

The Social and Economic Situation of the Scheduled Tribes in India

in: Matthew Manning / Christopher Ambrey / Christopher Fleming (eds.), Routledge Handbook of Indigenous Well-being, London: Routledge, forthcoming

Clara Brandi / Imme Scholz / Jann Lay / Nancy Alexander / Rainer Thiele / Ram Upendra Das / Richard Klein

Coherent G20 policies towards the 2030 Agenda for Sustainable Development

G20 Insight Platform, 2017

Marina Dodlova / Anna Giolbas / Jann Lay

Non-Contributory Social Transfer Programmes in Developing Countries: A New Data Set and Research Agenda

GIGA Working Paper, No. 290, August 2016