Distributional impacts of carbon taxation in Mexico

Abstract

The main aim of this paper is to analyze the different impacts of carbon taxation in Mexican households at different income levels. First, we estimate a household demand system for nondurable goods with special emphasis on energy-related goods. Then, we use the results to simulate the introduction of a carbon tax. We look at the potential to raise revenue with the aim of implementing different redistributive policies in order to address issues of inequality and poverty. Moreover, we evaluate the effects of carbon taxes on demand and emissions reduction.