Mitigating poverty: The patterns of multiple carbon tax and recycling regimes for Peru

Carbon taxes are an economically effective and efficient policy measure to address climate change mitigation. However, they can have severe adverse distributional effects. Recycling parts of the fiscal revenues vulnerable, lower income households through cash transfers (social assistance) is option also overcome associated political difficulties. This paper simulates impacts such a combined reform in Peru. In first step, we assess varying carbon tax rates. second evaluate different scenarios recycling existing or expanded transfer schemes towards vulnerable households. The results indicate that national tax, without compensation, would increase poverty but no significant impact on inequality. When recycled schemes, however, actually decrease. Depending amount be redistributed design scheme, our simulations show proportional reduction headcount up around 17%. addition, underlines how crucial it go beyond aggregate measures better identify losers from reform; assure “leave one behind” principle Sustainable Development Goals (SDGs) addressed.