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A carbon tax on agriculture? A CGE analysis for Chile

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  • Cristian Mardones
  • Mirko Lipski

Abstract

This paper evaluates the implementation of a tax on CO2 equivalent (CO2eq) emissions produced by the agricultural sector. Computable general equilibrium (CGE) simulations consider tax rates ranging from $5 to $131 USD/ton CO2eq with sensitivity analyses. We find that a tax applied only to agricultural emissions makes agriculture less competitive and, thus, reduces its production. Real GDP falls from 0.00–0.01% to 0.12–0.40% as a result, and total emissions decline from 0.07–0.10% to 1.79–2.25%. The tax is slightly regressive. We conclude that the tax on just agriculture does not substantially reduce emissions. Indeed, we find it is more efficient to apply the tax across the board, while subsidizing the forestry.

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  • Cristian Mardones & Mirko Lipski, 2020. "A carbon tax on agriculture? A CGE analysis for Chile," Economic Systems Research, Taylor & Francis Journals, vol. 32(2), pages 262-277, April.
    • Handle: RePEc:taf:ecsysr:v:32:y:2020:i:2:p:262-277
    DOI: 10.1080/09535314.2019.1676701
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    Cited by:

    1. Nicolas Garrido & Jeffrey Morales, 2023. "An analysis of the effect of fiscal expenditure on the income distribution of Chilean households," Journal of Economic Structures, Springer;Pan-Pacific Association of Input-Output Studies (PAPAIOS), vol. 12(1), pages 1-19, December.
    2. Mardones, Cristian & Mena, Camilo, 2020. "Effects of the internalization of the social cost of global and local air pollutants in Chile," Energy Policy, Elsevier, vol. 147(C).
    3. Cristian Mardones, 2021. "Analysis on complementarity between a CO2 tax and an emissions trading system to reduce industrial emissions in Chile," Energy & Environment, , vol. 32(5), pages 820-833, August.
    4. Mardones, Cristian & Ortega, José, 2021. "Are the emissions trading systems’ simulations generated with a computable general equilibrium model sensitive to the nested production structure?," Applied Energy, Elsevier, vol. 298(C).

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