A Comprehensive Climate Mitigation Strategy for Mexico

53 Pages Posted: 4 Feb 2022

See all articles by Simon Black

Simon Black

International Monetary Fund (IMF)

Koralai Kirabaeva

International Monetary Fund (IMF)

Ian Parry

International Monetary Fund (IMF)

Mehdi Raissi

International Monetary Fund (IMF) - Fiscal Affairs Department

Karlygash Zhunussova

International Monetary Fund (IMF)

Date Written: October 1, 2021

Abstract

This paper discusses a comprehensive strategy for implementing Mexico’s climate mitigation commitments. Progressively increasing carbon prices from current levels of US$3 per ton to US$75 per ton by 2030 would achieve Mexico’s mitigation pledges, while raising annual revenues of 1.8 percent of GDP and cumulatively averting 11,600 deaths from local air pollution. The carbon price would raise fossil fuel and electricity prices, imposing burdens of 2.7 percent of consumption on the average Mexican household. However, recycling carbon pricing revenues would offset most of this burden, and targeted transfers could make the reform pro-poor and pro-equity. Additionally, the economic efficiency costs of carbon pricing (0.3 percent of GDP in 2030) are more than offset by local air pollution and other domestic environmental benefits (before even counting climate benefits). Mexico would need a more ambitious 2030 target if it were to follow many other countries in adopting a midcentury ‘net-zero’ emissions target. To enhance the effectiveness of the mitigation strategy, carbon pricing can be reinforced with sectoral instruments, such as feebates in the transport, power, industry, building, forestry, extractive, and agricultural sectors. Complementary policies are also needed to support public investment in the clean energy transition.

Keywords: Climate change, Mexico climate mitigation, carbon pricing, carbon tax, emissions trading system, feebate, natural gas, industry, buildings, transportation, agriculture, forestry., emissions target, mitigation strategy, transition policy, distributional incidence, emission rate, emissions intensity, Greenhouse gas emissions, Carbon tax, Climate change, Natural disasters, Global, Western Hemisphere

JEL Classification: Q48, Q54, Q58, H23, Q42

Suggested Citation

Black, Simon and Kirabaeva, Koralai and Parry, Ian and Raissi, Mehdi and Zhunussova, Karlygash, A Comprehensive Climate Mitigation Strategy for Mexico (October 1, 2021). IMF Working Paper No. 2021/246, Available at SSRN: https://ssrn.com/abstract=4026474

Simon Black (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Koralai Kirabaeva

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Ian Parry

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Mehdi Raissi

International Monetary Fund (IMF) - Fiscal Affairs Department ( email )

700 19th Street, NW
Washington, DC 20431
United States

HOME PAGE: http://https://sites.google.com/site/mehdiraissi/

Karlygash Zhunussova

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
30
Abstract Views
167
PlumX Metrics