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Environmental taxation for reducing greenhouse gases emissions in Chile: an input–output analysis

Abstract

This study uses an environmental extension of the Leontief price model to analyse various tax rates on the carbon dioxide (CO2) and other greenhouse gases (GHGs) emissions that are generated by the most polluting sectors of the Chilean economy. By using this methodology, it is possible to obtain a counterfactual scenario for the prices, levels of production and emissions of each economic sector, as well as, for tax collection, consumer spending and the consumer price index. This analysis is important because Chile is internationally committed to reducing its emissions by 30% by 2030. According to the results, to meet the target CO2 emissions only using tax policies, tax should be approximately 20 times higher than their current levels in the electricity sector. Alternatively, a lower tax of US $30/ton of CO2 and other GHGs applied to all sectors of the economy could reduce CO2 and other GHGs emissions by up to 25.7% with less of a negative impact on the economy.

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Fig. 1

Source: own elaboration

Fig. 2

Source: own elaboration

Notes

  1. 1.

    This tax on CO2 emissions took effect in 2017.

  2. 2.

    This concept refers to any action to reduce developing country emissions related to business as usual emissions by 2020. NAMAs are supported and facilitated by international funding destined to technology, financing and capacity creation.

  3. 3.

    In order to have a tax of US $5/ton CO2, it can be mentioned that for each liter of diesel, 0.00263 tons of CO2 are emitted; therefore, using one liter of diesel will be equivalent to US $0.01315 tax. In Chile the price of diesel in January 2017 was US $0.7325 per liter, then it can be concluded that the tax will be equivalent to 1.79% of the price of this fuel.

  4. 4.

    http://www.snichile.cl/sites/default/files/documentos/2014_iin_cl.pdf.

  5. 5.

    However, it would have been better if the aggregation occurred after the calculations.

  6. 6.

    http://data.worldbank.org/country/chile.

  7. 7.

    Negative direct emissions from the forest sector come from trees CO2 capture (see Table 1) but not from input–output analysis developed later.

  8. 8.

    See World Bank (2016).

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Correspondence to Cristian Mardones.

Appendix

Appendix

See Tables 5 and 6.

Table 5 Emission factors for greenhouse gas inventories.
Table 6 Global warming potential of greenhouse gases.

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Mardones, C., Muñoz, T. Environmental taxation for reducing greenhouse gases emissions in Chile: an input–output analysis. Environ Dev Sustain 20, 2545–2563 (2018). https://doi.org/10.1007/s10668-017-0004-z

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Keywords

  • Leontief price model
  • Environmental taxes
  • CO2
  • GHGs