“Multiple Dividends with Climate
Change Policies: Evidence
from an Argentinean CGE Model”
María Priscila Ramos and Omar Osvaldo Chisari
Abstract Given the international commitments concerning Climate Change, we
evaluate the costs and the potential multiple dividends of applying a carbon tax and/or
an environmentally oriented trade policy (EGA) as part of an Environmental Tax
Reform (ETR) in Argentina. Reviewing the literature concerning the conditions under
which multiple dividends of an ETR can emerge, and also comparing the dividends
and costs of implementing alternative ETRs in Argentina using computable general
equilibrium model simulations, we conclude that given the structural socio-economic
characteristics of developing countries (i.e. persistent unemployment, uneven income
distribution, recurrent external and fiscal imbalances, high capital volatility, among
others), the implementation of an ETR could be more expensive than for countries
without these constraints. For instance, an ETR that leads to an increase in the unemployment rate would easily become impracticable. Results highlight that multiple
dividends could emerge when a carbon tax helps to reduce distortionary taxes on
labour. Unemployment due to fixed real wages and low capital mobility across sectors
and countries allow for this multiple-dividend result. Moreover, when this first best
choice of ETR is not applicable, an EGA could also lead to multiple dividends under
the same labour market conditions, but with greater capital mobility across sectors
and the possibility to import a greener production technology. However, the latter
could exert a high pressure on the external balance when implementing a foreign
technology. Designing an ETR for developing countries requires this cost-dividend
analysis since results seem to be highly sensitive to factors market conditions and
the available technology.
M. P. Ramos (B)
Departamento de Economía, Facultad de Ciencias Económicas, Universidad de Buenos Aires,
Buenos Aires, Argentina
e-mail: mpramos@economicas.uba.ar
M. P. Ramos · O. O. Chisari
CONICET-Universidad de Buenos Aires, Instituto Interdisciplinario de Economía Política
(IIEP-Baires), Buenos Aires, Argentina
e-mail: ochisari@gmail.com
M. P. Ramos
Centre d’Études Prospectives et d’Information Internationale (CEPII), Paris, France
© Springer Nature Switzerland AG 2021
M. E. Belfiori and M. J. Rabassa, (eds.) The Economics of Climate Change
in Argentina, The Latin American Studies Book Series,
https://doi.org/10.1007/978-3-030-62252-7_5
85
Change Policies: Evidence
from an Argentinean CGE Model”
María Priscila Ramos and Omar Osvaldo Chisari
Abstract Given the international commitments concerning Climate Change, we
evaluate the costs and the potential multiple dividends of applying a carbon tax and/or
an environmentally oriented trade policy (EGA) as part of an Environmental Tax
Reform (ETR) in Argentina. Reviewing the literature concerning the conditions under
which multiple dividends of an ETR can emerge, and also comparing the dividends
and costs of implementing alternative ETRs in Argentina using computable general
equilibrium model simulations, we conclude that given the structural socio-economic
characteristics of developing countries (i.e. persistent unemployment, uneven income
distribution, recurrent external and fiscal imbalances, high capital volatility, among
others), the implementation of an ETR could be more expensive than for countries
without these constraints. For instance, an ETR that leads to an increase in the unemployment rate would easily become impracticable. Results highlight that multiple
dividends could emerge when a carbon tax helps to reduce distortionary taxes on
labour. Unemployment due to fixed real wages and low capital mobility across sectors
and countries allow for this multiple-dividend result. Moreover, when this first best
choice of ETR is not applicable, an EGA could also lead to multiple dividends under
the same labour market conditions, but with greater capital mobility across sectors
and the possibility to import a greener production technology. However, the latter
could exert a high pressure on the external balance when implementing a foreign
technology. Designing an ETR for developing countries requires this cost-dividend
analysis since results seem to be highly sensitive to factors market conditions and
the available technology.
M. P. Ramos (B)
Departamento de Economía, Facultad de Ciencias Económicas, Universidad de Buenos Aires,
Buenos Aires, Argentina
e-mail: mpramos@economicas.uba.ar
M. P. Ramos · O. O. Chisari
CONICET-Universidad de Buenos Aires, Instituto Interdisciplinario de Economía Política
(IIEP-Baires), Buenos Aires, Argentina
e-mail: ochisari@gmail.com
M. P. Ramos
Centre d’Études Prospectives et d’Information Internationale (CEPII), Paris, France
© Springer Nature Switzerland AG 2021
M. E. Belfiori and M. J. Rabassa, (eds.) The Economics of Climate Change
in Argentina, The Latin American Studies Book Series,
https://doi.org/10.1007/978-3-030-62252-7_5
85