“Multiple Dividends with Climate Change Policies: Evidence …
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social issues (poverty and inequality) and government and institutional characteristics (fiscal deficits, tax evasion, chronic corruption, deficient public goods provision,
lower stringency of law and weak policy enforcement) of developing countries, such
as Argentina.
In this sense, CC policies in Argentina should be tackled as part of a wider sustainable development programme, where the CC mitigation should not deteriorate (but
improve, if possible) other structural constraints pervasive in developing countries,
as mentioned above. Thus, instead of limiting the discussion to the environmental
benefits of environmental or trade policies, we will enlarge the analysis considering
whether other benefits or losses arise in the fight against GHG emissions. It is true
that the literature on environmental policies has been exploring the presence of other
dividends for the economy, with and without a reform in the national tax system,
mainly a double dividend. In general terms, the double dividend literature studies if,
additionally to environmental gains, efficiency gains of the tax system can be attained
by replacing distortionary taxes with carbon taxes. We will explore the existence of
other dividends that are also critical, such as the impact of emission taxes and trade
policies on the trade balance, unemployment, and income distribution.
Notwithstanding the foregoing, at the end of the day, all dividends could be
reduced to only one index: welfare. Welfare is directly impacted by climate change
(e.g. discomfort, health problems and impoverished landscapes), and indirectly, for
example, through the reduction of productivity and the loss of endowments (e.g.
arable land). However, it is difficult to synthesize everything in only one dimension
due, among other reasons, to differential intergenerational and intra-generational
effects of shocks and policies. Beyond that, macroeconomic distress can influence the
evaluation of welfare, particularly under conditions of unemployment of resources.
That is why it is useful to consider several dimensions for potential gains and losses.
This chapter aims at analysing different CC policies under the factors market
behaviour that characterizes the Argentinean economy. After analysing the literature
on multiple dividends of environmental policies (Sect. “Literature on Multiple Dividends of the Environmental Policy”) and describing the environmental concerns of
Argentina in the current context (Sect. “Argentina and the CC Commitments”), we
present a Computable General Equilibrium (CGE) model for this country, assuming
unemployment, capital restriction and rigidities in both factor markets, as a tool
for simulating counterfactual CC policy scenarios (Sect. “Appropriate Tool for
Measuring Dividends of CC Policies: A CGE Model for Argentina”). For policy
comparison, we have chosen the results from the implementation of a carbon tax in
Argentina from Chisari and Miller (2015) and the active participation of Argentina
in the plurilateral liberalization of environmental goods and services (EGS) from
Ramos et al. (2017). Even though, from a CC perspective, the carbon tax is the first
policy option and the trade policy is a second-best, we evaluate not only the reduction
in carbon emissions, but also other positive side effects on development variables
(employment, income distribution, trade and pressure of the external balance, GDP).
Final remarks concerning the Argentinean CC policy could also contribute to the
discussion and the design of CC policies for other developing countries in Latin
America.
87
social issues (poverty and inequality) and government and institutional characteristics (fiscal deficits, tax evasion, chronic corruption, deficient public goods provision,
lower stringency of law and weak policy enforcement) of developing countries, such
as Argentina.
In this sense, CC policies in Argentina should be tackled as part of a wider sustainable development programme, where the CC mitigation should not deteriorate (but
improve, if possible) other structural constraints pervasive in developing countries,
as mentioned above. Thus, instead of limiting the discussion to the environmental
benefits of environmental or trade policies, we will enlarge the analysis considering
whether other benefits or losses arise in the fight against GHG emissions. It is true
that the literature on environmental policies has been exploring the presence of other
dividends for the economy, with and without a reform in the national tax system,
mainly a double dividend. In general terms, the double dividend literature studies if,
additionally to environmental gains, efficiency gains of the tax system can be attained
by replacing distortionary taxes with carbon taxes. We will explore the existence of
other dividends that are also critical, such as the impact of emission taxes and trade
policies on the trade balance, unemployment, and income distribution.
Notwithstanding the foregoing, at the end of the day, all dividends could be
reduced to only one index: welfare. Welfare is directly impacted by climate change
(e.g. discomfort, health problems and impoverished landscapes), and indirectly, for
example, through the reduction of productivity and the loss of endowments (e.g.
arable land). However, it is difficult to synthesize everything in only one dimension
due, among other reasons, to differential intergenerational and intra-generational
effects of shocks and policies. Beyond that, macroeconomic distress can influence the
evaluation of welfare, particularly under conditions of unemployment of resources.
That is why it is useful to consider several dimensions for potential gains and losses.
This chapter aims at analysing different CC policies under the factors market
behaviour that characterizes the Argentinean economy. After analysing the literature
on multiple dividends of environmental policies (Sect. “Literature on Multiple Dividends of the Environmental Policy”) and describing the environmental concerns of
Argentina in the current context (Sect. “Argentina and the CC Commitments”), we
present a Computable General Equilibrium (CGE) model for this country, assuming
unemployment, capital restriction and rigidities in both factor markets, as a tool
for simulating counterfactual CC policy scenarios (Sect. “Appropriate Tool for
Measuring Dividends of CC Policies: A CGE Model for Argentina”). For policy
comparison, we have chosen the results from the implementation of a carbon tax in
Argentina from Chisari and Miller (2015) and the active participation of Argentina
in the plurilateral liberalization of environmental goods and services (EGS) from
Ramos et al. (2017). Even though, from a CC perspective, the carbon tax is the first
policy option and the trade policy is a second-best, we evaluate not only the reduction
in carbon emissions, but also other positive side effects on development variables
(employment, income distribution, trade and pressure of the external balance, GDP).
Final remarks concerning the Argentinean CC policy could also contribute to the
discussion and the design of CC policies for other developing countries in Latin
America.