Energy taxation, subsidy removal and poverty in Mexico

Abstract

Equity and efficiency are crucial issues behind any tax reform, but they are particularly relevant in countries with high inequality and large shares of poverty. This paper provides a comprehensive socio-economic empirical assessment of Mexico's proposed (and partially implemented) tax reforms in the energy domain, and of a hypothetical partial removal of existing electricity subsidies. Using a rich household income and expenditure survey within the context of a demand system adjustment of non-durable goods, the article provides the public-revenue, environmental and distributional impacts from the simulation of different combinations of energy taxation, subsidy-removal and distributive offsets. The paper also provides detailed ex-ante evidence on the effects of compensatory devices that may contribute to the successful implementation of energy reform packages and significant poverty alleviation in Mexico.

Wind and Solar Subsidy Policy Based on Combustion Theory

“…It also gradually shows polymorphism, the social entropy value increases, and the system appears disordered [11][12]. At the same time, the social combustion accelerant will continue to accelerate the acquisition of individual energy and eventually accelerate the accumulation of burning substances, so that it quickly reaches the threshold, and finally the social ignition temperature, that is, the ignition of the fuse, will cause the system to burn, achieving an orderly to disorderly upheaval [13][14].…”

A room with a view: a special issue with a special perspective

“…Like Brock and Xepapadeas (2020), Labeaga et al . (2020), in their paper ‘Energy taxation, subsidy removal and poverty in Mexico’ look at distributional aspects of climate change, performing an empirical analysis focused on poverty in a growing middle-income country, Mexico. Understanding the distributional impacts of energy taxes is particularly important in Mexico as it shows large disparities in energy consumption and high poverty and inequality levels.…”

“…As Labeaga et al . (2020: 18) claim, ‘international experience shows that putting energy prices ‘right’ requires long-term plans and the introduction of mechanisms to accommodate the transition’. However, ‘getting the price right’ takes time and may not be sufficient to induce carbon-reducing innovation at the scale and speed that are needed.…”

How vulnerable are small firms to energy price increases? Evidence from Mexico

“…Energy price reforms have repeatedly sparked social unrest in a number of developing (and some developed) economies. While the direct negative impact on consumer welfare arguably plays an important role for opposition to subsidy reforms (Coady et al, 2018;Renner et al, 2018;Labeaga et al, 2020), the adverse impact on MSEs could be substantial. This is why these often informal MSEs, with their entrepreneurs and (family) workers, may comprise another important opposition group to policies that increase energy prices, that is, subsidy reforms or carbon pricing, in developing countries.…”