“Multiple Dividends with Climate Change Policies: Evidence …
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unemployment rate also falls, thus leading to a triple dividend. Kuralbayeva (2015)
proposes to consider a triple dividend of an ETR associated not only with unemployment, but also to rural–urban migration. In the case of Mexico, but also applied
to other developing countries, Kuralbayeva (2018) finds that, under these particular labour market conditions (unemployment, informality and regional mobility), a
carbon tax (urban sectors) could lead to a reduction in the unemployment rate through
the labour migration from urban to rural areas that depresses labour incomes in the
latter.
An ETR could also help to fight inequality or poverty depending on the change
in the purchasing power of low-income households. When the initial tax system
is non-optimal from a non-environmental point of view, a carbon tax could have a
regressive impact on income distribution if the pattern of consumption of poor households is intensive in carbon-intensive goods; however, this inequality effect could be
compensated by a tax recycling option through other taxes (Klenert et al. 2016). This
effect could be produced when the tax reduction focuses particularly on improving
food access. Thus, the possibility of reaching a triple dividend—decreasing emissions, increasing GDP and decreasing poverty—emerges when the carbon tax makes
it possible to reduce food prices (Van Heerden et al. 2006).
As mentioned above, Grottera et al. (2017) also focus on the triple dividend
in Brazil, looking for a tax recycling scheme through an ETR that leads to lower
levels of inequality. Lump-sum transfers to poor households do not result in a triple
dividend, but lower labour taxes, i.e. moderate carbon taxes (25$R/CO 2 t), and lower
labour taxes not only lead to lower carbon emissions, but also lower inequality and
unemployment.
The Fourth Dividend: Improving the External Balance
A strong double/third dividend could be blocked when it creates trade balance disequilibria. Thus, it is also important to look at a fourth dividend of an ETR, which
concerns the improvement of the external balance, since it is also a weakness of
developing economies, and Argentina is not an exception.
Given the multiple dividends we are looking for, a single policy instrument would
not be enough and, instead, it would be necessary to continue exploring different
combinations of environmentally oriented policy instruments for a full ETR.
Chisari and Miller (2015) find that the costs of reducing emissions in small
economies are not negligible due to two main reasons: the state of the labour market
(analysed above) and the impact on exports. As mentioned above, the implementation of carbon taxes leads to magnified costs when wages are not determined in the
market and when capital is freely mobile with respect to the rest of the world. But,
additionally, when real wages are inflexible downward, higher costs due to taxes also
increase nominal wages. Consequently, domestic goods become less competitive and
exports are thus reduced, decreasing the activity level of firms and the total employment rate. Capital flight due to differentials in the rate of return with respect to the
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unemployment rate also falls, thus leading to a triple dividend. Kuralbayeva (2015)
proposes to consider a triple dividend of an ETR associated not only with unemployment, but also to rural–urban migration. In the case of Mexico, but also applied
to other developing countries, Kuralbayeva (2018) finds that, under these particular labour market conditions (unemployment, informality and regional mobility), a
carbon tax (urban sectors) could lead to a reduction in the unemployment rate through
the labour migration from urban to rural areas that depresses labour incomes in the
latter.
An ETR could also help to fight inequality or poverty depending on the change
in the purchasing power of low-income households. When the initial tax system
is non-optimal from a non-environmental point of view, a carbon tax could have a
regressive impact on income distribution if the pattern of consumption of poor households is intensive in carbon-intensive goods; however, this inequality effect could be
compensated by a tax recycling option through other taxes (Klenert et al. 2016). This
effect could be produced when the tax reduction focuses particularly on improving
food access. Thus, the possibility of reaching a triple dividend—decreasing emissions, increasing GDP and decreasing poverty—emerges when the carbon tax makes
it possible to reduce food prices (Van Heerden et al. 2006).
As mentioned above, Grottera et al. (2017) also focus on the triple dividend
in Brazil, looking for a tax recycling scheme through an ETR that leads to lower
levels of inequality. Lump-sum transfers to poor households do not result in a triple
dividend, but lower labour taxes, i.e. moderate carbon taxes (25$R/CO 2 t), and lower
labour taxes not only lead to lower carbon emissions, but also lower inequality and
unemployment.
The Fourth Dividend: Improving the External Balance
A strong double/third dividend could be blocked when it creates trade balance disequilibria. Thus, it is also important to look at a fourth dividend of an ETR, which
concerns the improvement of the external balance, since it is also a weakness of
developing economies, and Argentina is not an exception.
Given the multiple dividends we are looking for, a single policy instrument would
not be enough and, instead, it would be necessary to continue exploring different
combinations of environmentally oriented policy instruments for a full ETR.
Chisari and Miller (2015) find that the costs of reducing emissions in small
economies are not negligible due to two main reasons: the state of the labour market
(analysed above) and the impact on exports. As mentioned above, the implementation of carbon taxes leads to magnified costs when wages are not determined in the
market and when capital is freely mobile with respect to the rest of the world. But,
additionally, when real wages are inflexible downward, higher costs due to taxes also
increase nominal wages. Consequently, domestic goods become less competitive and
exports are thus reduced, decreasing the activity level of firms and the total employment rate. Capital flight due to differentials in the rate of return with respect to the