Economic, environmental and distributive analysis of the taxes to global and local air pollutants in Chile

In 2017, environmental taxes on the emissions of global (CO2) and local air pollutants (SO2, NOx, and PM) were introduced in Chile for stationary sources with thermal power greater than or equal to 50 MWt. Therefore, this paper uses the environmental extension of the Leontief price model and microsimulations to analyze the main economic, environmental, and distributive effects of this policy. The results show that with the current tax rates, a minimal decrease in emissions is achieved. Also, other scenarios are simulated to evaluate the impact of modifying the current tax rates. For example, it is determined that the increase in taxes on local (global) pollutants complements the reduction of emissions from global (local) pollutants. Finally, the results of the Leontief price model are transferred to microdata to analyze the effects on the poverty rate and income distribution. The micro-simulations show that the indicators of the income distribution are little sensitive to the environmental taxes on global and local air pollutants, but the poverty rate rises more in the case of increases in the CO2 tax. (C) 2020 Elsevier Ltd. All rights reserved.