Heterogeneous welfare and emission effects of energy tax policies in Brazil

Paula Pereda () and Maria Alice Christofoletti ()

No 2019_32, Working Papers, Department of Economics from University of São Paulo (FEA-USP)

Abstract: The consolidation of the energy sector as one of the main emitters of greenhouse gases in Brazil is directly related to the expansion of fuel consumption in passenger and cargo transport and to the higher use of thermal power plants for electricity generation. This fact reflects a detachment from the historical renewable energy and biofuels production and goes against the global efforts to reduce GHG emissions. Our paper analyzes the short run emissions and distributional effects of energy price changes in a partial equilibrium framework. Our findings suggest that taxes and subsidies in fuel prices (oil and diesel, respectively) are progressive, but have positive impact on total household emissions due to substitution effects. Despite being regressive, changes in electricity price have large effects on household emissions due to the characteristics of electric energy supply in Brazil. More environment-friendly policies that subsidize ethanol have a small but positive effect on the economy and tend to reduce households emissions. However, large substitution effects - due to an increase in the demand for CO2eq intensive goods, such as commuting and transportation services - when also taxing oil do not offset the reduction in emissions caused by a lower ethanol price. Therefore, understanding who benefits from energy price taxes and subsidies and their welfare impacts policies are key to gaining public support for a greener energy matrix.

Keywords: Energy policies; CO2eq emissions; households (search for similar items in EconPapers)
JEL-codes: D12 D61 Q48 (search for similar items in EconPapers)
Date: 2019-08-21
New Economics Papers: this item is included in nep-ene, nep-env, nep-reg and nep-tre
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.repec.eae.fea.usp.br/documentos/Pereda_Christofoletti_32WP.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spa:wpaper:2019wpecon32

Ordering information: This working paper can be ordered from

Access Statistics for this paper

More papers in Working Papers, Department of Economics from University of São Paulo (FEA-USP) Contact information at EDIRC.
Bibliographic data for series maintained by Pedro Garcia Duarte ( this e-mail address is bad, please contact ).