The Impacts of Carbon Taxes and Cash Transfers on Poverty and Inequality Across Years: A Peruvian Case Study

26 Pages Posted: 19 May 2022

See all articles by Daniele Malerba

Daniele Malerba

German Institute of Development and Sustainability (IDOS)

Hauke Ward

Leiden University - CML, Department Industrial Ecology; Mercator Research Institute on Global Commons and Climate Change (MCC)

Anja Gaentzsch

Free University of Berlin (FUB)

Federico Roscioli

University of Florence

Abstract

Carbon taxes could be key policies to achieve ambitious climate goals. Yet their distributional and poverty impacts need to be addressed. This can be achieved by redistributing tax revenues to households though cash transfers. Nevertheless, the right design of a cash transfer scheme depends on the distribution of carbon footprints and the consequent tax impacts, which in turn depend on temporal and economic factors. Therefore, the time dimension, i.e. the year considered by the study, may influence the estimated distributional patterns and associated policy recommendations. To fill the existing research gap, we assess the distribution of carbon footprints, and the impact of the carbon tax and its combination with cash transfers on poverty and inequality for three years (2004, 2007 and 2011) for Peru. We show that, in a context of rapid economic growth, footprints increase over time, particularly for lower deciles. Most importantly, the distributional impacts of a reform combining carbon tax and cash transfers change by year, driven by inflation, production and consumption patterns, as well as the distribution of income. The paper concludes that, to maximize poverty and inequality reduction, the design of cash transfer programs and tax levels need to be adapted over time.

Keywords: Poverty, Inequality, carbon pricing, Social protection, Peru, environmental fiscal reform

Suggested Citation

Malerba, Daniele and Ward, Hauke and Gaentzsch, Anja and Roscioli, Federico, The Impacts of Carbon Taxes and Cash Transfers on Poverty and Inequality Across Years: A Peruvian Case Study. Available at SSRN: https://ssrn.com/abstract=4113769 or http://dx.doi.org/10.2139/ssrn.4113769

Daniele Malerba (Contact Author)

German Institute of Development and Sustainability (IDOS) ( email )

Tulpenfeld 6
Bonn, 53113
Germany

Hauke Ward

Leiden University - CML, Department Industrial Ecology ( email )

PO Box 9518
Leiden, ZH NL-1012DE
Netherlands

Mercator Research Institute on Global Commons and Climate Change (MCC) ( email )

Torgauer Straße 12-15
Berlin, 10829
Germany

Anja Gaentzsch

Free University of Berlin (FUB) ( email )

Van't-Hoff-Str. 8
Berlin, Berlin 14195
Germany

Federico Roscioli

University of Florence ( email )

Piazza di San Marco, 4
Florence, 50121
Italy

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