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Double Dividend of Low-carbon Growth in Mexico: A Dynamic General Equilibrium Assessment

Author

Listed:
  • Fabio GRAZI
  • François-Xavier BELLOCQ
  • Frédéric REYNES
  • Gisella LANDA
  • Ivan ISLAS

Abstract

This paper simulates the medium- and long-term impact of proposed and expected energy policy on the environment and on the Mexican economy. The analysis has been conducted with a Multi-sector Macroeconomic Model for the Evaluation of Environmental and Energy policy (Three-ME). This model is well suited for policy assessment purposes in the context of developing economies as it indicates the transitional effects of policy intervention. Three-ME estimates the carbon tax required to meet emissions reduction targets within the Mexican “Climate Change Law”, and assesses alternative policy scenarios, each reflecting a different strategy for the recycling of tax revenues. With no compensation, the taxation policy if successful will succeed in reducing CO2 emissions by more than 75% by 2050 with respect to Business as Usual (BAU), but at high economic costs. Under full redistribution of carbon tax revenues, a double dividend arises and the policy is beneficial both in terms of GDP and CO2 emissions reduction.

Suggested Citation

  • Fabio GRAZI & François-Xavier BELLOCQ & Frédéric REYNES & Gisella LANDA & Ivan ISLAS, 2017. "Double Dividend of Low-carbon Growth in Mexico: A Dynamic General Equilibrium Assessment," Working Paper ebdeaa62-c32a-4c84-baf0-2, Agence française de développement.
    • Handle: RePEc:avg:wpaper:en7733
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    References listed on IDEAS

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    More about this item

    Keywords

    Mexique;

    JEL classification:

    • Q - Agricultural and Natural Resource Economics; Environmental and Ecological Economics

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