Redistributive impacts of a carbon tax in Colombia: The link between models of microsimulations and general equilibrium

Abstract

This paper examines the redistributive effects of taxing carbon dioxide emissions on household welfare through changes in prices of consumer goods. To this end, the results of a computable general equilibrium model are sequentially integrated with a household-level analysis based on microsimulation models (MSM). The analysis also allows for comparisons between the effects of using arithmetic and behavioral MSMs. Results show that a carbon tax has negative effects on population welfare, with higher-income households being the most affected and middle-class households the least. Finally, a number of policy recommendations for reducing emissions and including well-being criteria in mitigation measures are presented.