A Comprehensive Climate Mitigation Strategy for Mexico

Cross-Border Impacts of Climate Policy Packages in North America

“…This shows that while blue-collar workers are expected to enjoy relative income gains in typical advanced economies, those are more exposed and rather loose in some emerging economies including Mexico. Black et al (2021) find that increasing a comprehensive carbon tax to USD 75 per ton would enable Mexico to meet its NDC 2030 target and found no adverse output effect in such a scenario. They also discuss redistributive issues, flagging that recycling revenues uniformly could offset 85 percent of the burden on the average household, while targeted transfers would raise equity, reduce poverty, and assist vulnerable households, workers, and regions.…”

Mexico

“…This is using the 2022 NDC update baseline for emissions, with 2013 as the reference year for policies, thus excluding the federal carbon tax of about USD 3.3 dollar per ton introduced in 2014 and the more recently introduced sub-regional carbon pricing initiatives like those in Zacatecas, Queretaro, Yucatan and Durango. 4 Global decarbonization efforts are modelled as proposed under the International Carbon Price Floor (ICPF) proposal (Parry et al 2021). Effects of national and global decarbonization are isolated by modeling two policy scenarios, (i) a broadbased carbon price floor only in Mexico (ICPF for Mexico only) while rest of the world continues with current policies only, and (ii) a carbon price floor globally (ICPF for all) modelled here as each country implementing either the ICPF floor or their NDC carbon price commitment, whichever is larger.…”

“…7 These results are inherently surrounded by uncertainties, such as those related to behavioral responses, technology and innovation and policy design and instruments which may affect output in transition scenarios. An alternative modeling exercise carried byBlack et al (2021) for instance suggested that a higher carbon tax may be needed to achieve such a mitigation outcome. They also found that marginal output effects could be slightly positive.©International Monetary Fund.…”