Cash transfers for pro-poor carbon taxes in Latin America and the Caribbean

Adrien Vogt-Schilb, Brian Walsh, Kuishuang Feng (), Laura Di Capua, Yu Liu, Daniela Zuluaga, Marcos Robles and Klaus Hubaceck
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Adrien Vogt-Schilb: Inter-American Development Bank
Brian Walsh: Inter-American Development Bank
Kuishuang Feng: Shandong University
Laura Di Capua: Inter-American Development Bank
Yu Liu: Institutes of Science and Development, Chinese Academy of Sciences
Daniela Zuluaga: Inter-American Development Bank
Marcos Robles: Inter-American Development Bank
Klaus Hubaceck: University of Groningen

Nature Sustainability, 2019, vol. 2, issue 10, 941-948

Abstract: Abstract Carbon taxes are advocated as efficient fiscal and environmental policy tools, but they have proven difficult to implement. One reason is that carbon taxes can aggravate poverty by increasing prices of basic goods and services such as food, heating and commuting. Meanwhile, cash transfer programmes have been established as some of the most efficient poverty-reducing policies used in developing countries. We quantify how governments could mitigate negative social consequences of carbon taxes by expanding the beneficiary base or the amounts disbursed with existing cash transfer programmes. We focus on Latin America and the Caribbean, a region that has pioneered cash transfer programmes, aspires to contribute to climate mitigation and faces inequality. We find that 30% of carbon revenues could suffice to compensate poor and vulnerable households on average, leaving 70% to fund other political priorities. We also quantify trade-offs for governments choosing who and how much to compensate.

Date: 2019
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DOI: 10.1038/s41893-019-0385-0

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