A Comprehensive Climate Mitigation Strategy for Mexico

By Simon Black, Koralai Kirabaeva, Ian W.H. Parry, Mehdi Raissi, Karlygash Zhunussova

October 18, 2021

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Simon Black, Koralai Kirabaeva, Ian W.H. Parry, Mehdi Raissi, and Karlygash Zhunussova. A Comprehensive Climate Mitigation Strategy for Mexico, (USA: International Monetary Fund, 2021) accessed December 21, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

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.

Subject: Carbon tax, Climate change, Environment, Greenhouse gas emissions, Natural disasters, Taxes

Keywords: Agriculture, Buildings, Carbon pricing, Carbon tax, Carbon tax, Climate change, Climate change, Distributional incidence, Emission rate, Emissions intensity, Emissions target, Emissions trading system, Feebate, Forestry., Global, Greenhouse gas emissions, Industry, Mexico climate mitigation, Mitigation strategy, Natural disasters, Natural gas, Transition policy, Transportation, Western Hemisphere

Publication Details

Pages:

53
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2021/246
Stock No:

WPIEA2021246
ISBN:

9781513599847
ISSN:

1018-5941

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