Abstract
In several countries, mining taxes are applied as a mechanism to collect resources, but without adequately evaluating their economic impacts. From a theoretical perspective, the implementation of royalties can be justified in the non-renewable nature of mining resources, while Pigouvian taxes aim to make productive activities internalize their environmental damage. This study illustrates the general equilibrium effects on the Chilean economy that would have the replacement of the current royalty on copper mining by Pigouvian taxes, considering various environmental damages. For the above, a computable general equilibrium model is developed and calibrated with a Social Accounting Matrix base year 2016. The results show that the internalization of all environmental damages would generate a significant drop in mining activity and electricity generation, contributing to reduce greenhouse gas emissions. Also, it is observed that the fall in GDP and increase in the exchange rate would modify the production of other tradable and non-tradable sectors, benefiting non-copper export sectors. On the other hand, the fall in economic activity reduces the payment to productive factors, although the impact is greater on capital and skilled labor. The latter would improve income distribution, but it would raise poverty.
Presenters
Cristian MardonesAssociate Professor, Department of Industrial Engineering, University of Concepción, Chile
Details
Presentation Type
Paper Presentation in a Themed Session
Theme
KEYWORDS
Royalty; Pigouvian tax; Sustainability; CGE model; Externalities
