Impuestos al Carbono en Latinoamérica y el Caribe Foro Latinoamericano del Carbono Juan Carlos Belausteguigoitia Centro ITAM de Energía y Recursos Naturales

Contents Properties Political economy Design issues Map of carbon taxes and ETS

Properties Polluter pays principle Static efficiency Dynamic efficciency Win-win-opportunities (double dividend) Institutional ease

Political Economy Distributional impact Impact on competitiveness

Design Issues Tax base and tax rates Taxation points (as direct as possible) Use of tax revenues Pre-announcement Combination of instruments

As of 2017, 42 national and 25 sub-national governments have implemented or planning to implement carbon pricing initiatives. These jurisdictions are responsible for more than 22 percent of global emissions. Others are developing or considering systems that will put a price on carbon in the future. Altogether, these actions will encompass almost half of global CO2 emissions.

Mapa de Impuestos al Carbono y de Sistemas de Emisiones Transferibles Imagen obtenida de: https://openknowledge.worldbank.org/bitstream/handle/10986/26565/9781464811296.pdf?sequence=4&isAllowed=y

Mapa de Impuestos al Carbono y de Sistemas de Emisiones Transferibles (el Lejano Oriente y Europa) Imagen obtenida de: https://openknowledge.worldbank.org/bitstream/handle/10986/26565/9781464811296.pdf?sequence=4&isAllowed=y

Appendix

Implicit price per ton of CO2 (MXN) CO2 Tax : Initiative of the Executive Proposed tax of MX$ 70.68 pesos per ton of CO2 (US$ 5.7 dollars) Executive Proposal Fuel Tax (MXN) Implicit price per ton of CO2 (MXN) % change in price Natural Gas 11.94 cents per m3 70.68 4.1% Propane 10.50 cents per liter Butane 12.86 Gasoline 16.21 1.4% Jet fuel and other kerosene 18.71 1.6% LP Gas 11.42 1.7% Diesel 19.17 Fuel Oil 20.74 2.6% Petroleum Coke 18.99 cents per kg 16.1% Coal Coke 19.30 17.0% Mineral Coal 17.83 Others Estimated reduction: 5.8 million tons of CO2 in 2014. Income of $26.7 billion pesos (2 billion US dollars) (1.8% of tax revenues of Federal Government in 2012) Source: Centro Mario Molina, 2013.

Approved version by Congress introduces changes that will generate inefficiencies in price signals Approved carbon tax, 2013 Tax Reform Fuel Tax (MXN) Implicit price per ton of CO2 (MXN) % Change in price Natural Gas 0.00 cents per m3 0.0% Propane 5.91 cents per liter 39.78 Butane 7.66 42.10 Gasoline 10.38 45.26 0.9% Jet fuel and other kerosene 0.00* 46.84 1.1% LP Gas 6.59 40.68 1.0% Diesel 12.59 46.42 Fuel Oil 13.45 45.84 1.7% Petroleum Coke 1.56 cents per kg 5.80 1.3% Coal Coke 3.66 13.4 Mineral Coal 2.75 10.92 2.6% Others 39.80 CMM emphasized the importance of a uniform price per ton of CO2 for all fuels. However, the discussions in Congress led to a different implicit price per fuel. Impact in the right direction, but inefficiencies due to different implicit prices. * The carbon tax does not apply to air fuel because Mexico is a signatory of the Convention on International Civil Aviation (also known as the Chicago Convention) since 1946, which exempts commercial aviation fuel from taxation.

Expected reduction of emissions for 2014 (Million tons of CO2) Reduction of CO2 emissions in 2014 (Mt/CO2) % of Mexico’s total emissions Proposal 5.83 1.18% Approved 1.61 0.33% Source: Centro Mario Molina.

Phasing out gasoline and diesel subsidies. Monthly consumption of regular gasoline (low octane) (Ene 97- Abr 13) Real price of regular gasoline (low octane) (Ene 97- Abr 13)

Carbon tax and gasoline subsidies phase out: achieving 1/6 of Mexico’s goal Estimated emissions reduction (CO2e/year) Carbon tax 1.6 million tons Gasoline and diesel subsidy phase out 5.4 million tons 7 million tons In perspective These two policies represent 1/6 of the yearly emissions reductions necessary to achieve the Mexican voluntary target. In 2010, Mexico pledged in the Cancun Agreements, to reduce 30% of its emissions by 2020.

Taxes as GDP Percentages in OECD Countries

Carbon pricing is a necessary part of a larger package of policies that can reduce greenhouse gas emissions. Performance standards Fiscal instruments Renewable portfolio standards Trade policies Law enforcement Information

All OECD member countries apply several environmentally related taxes All OECD member countries apply several environmentally related taxes. A database operated in co-operation between OECD and the European Environment Agency (EEA), currently details about 375 such taxes in OECD countries – plus i.a. some 250 environmentally related fees and charges. The taxes raise revenues in the order of 2-2.5% of GDP. The environmental effectiveness and economic efficiency of the environmentally related taxes could, however, be improved further if existing exemptions and other special provisions were scaled back.