Looking for a Double Dividend of a Carbon Tax in Argentina: an input-output evaluation

CARLOS ADRIAN ROMERO; PAULA MICAELA ACHENBACH; MARIA PRISCILA RAMOS

Workshop; Workshop "Bioenergía y Desarrollo Regional"; 2020

Argentina has recently accepted international Climate Change commitments (e.g.,Paris Agreement) and since the beginning of 2018 has implemented a carbon tax,particularly on fossil fuels. However, for a developing economy where socio-economicproblems are relatively more worrying and urgent for the population, this environ-mental goal should be in line with others related to reducing unemployment andsocio-economic disparities. Thus, the aim of this paper is to evaluate the impact ofimplementing a carbon tax in Argentina not only for reducing GHG emissions butalso looking for other dividends. The empirical hypothesis we test is that recyclingthe carbon tax revenue, through lower distorting taxes on labor or greater subsidieson key sectors, leads improving both, environmental and economic indicators (i.e.,GDP, employment, GHG emissions and sectors? outputs) of the country. In orderto achieve this objective, we carry out with an Input-Output Model to Argentina(2015) and we run three scenarios of recycling carbon tax revenue. Our main resultsshow that when the revenue is not recycled at all, national emissions fall at the ex-pense of a huge decline in economic growth. But when labor taxes are reduced in thesame amount of the carbon tax revenue the number of people employed per unit ofproduct increases (employment double dividend). No Double Dividend is evidencedwhen recycling the carbon tax revenue as direct transfers to households.