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 Hubacek

No 9883, IDB Publications (Working Papers) from Inter-American Development Bank

Abstract: Carbon taxes are advocated as efficient fiscal and environmental policies, 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 programs have been established as some of the most efficient poverty-reducing policies used in developing countries. Here, we quantify how governments can mitigate negative social consequences of carbon taxes by expanding the beneficiary base or the amounts disbursed with existing cash transfer programs. We focus on Latin America and the Caribbean, a region that has pioneered cash transfer programs, which 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 tradeoffs for governments choosing who and how much to compensate.

Keywords: cash transfers; carbon taxes; climate change (search for similar items in EconPapers)
JEL-codes: H22 H23 N56 O13 Q01 Q54 (search for similar items in EconPapers)
Date: 2019-10
References: Add references at CitEc
Citations: View citations in EconPapers (22)

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Persistent link: https://EconPapers.repec.org/RePEc:idb:brikps:9883

DOI: 10.18235/0001930

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