Methodological proposal to approximate the sectoral impacts of a carbon tax at the regional level – the case of Chile

This study proposes a methodological approach to approximate the sectoral impacts of carbon taxes in the different regions of Chile through the environmental extension of intraregional input – output models. These models are calibrated by regionalizing technical coefficients using an indirect method called Industry-Specific Flegg Location Quotient. Carbon dioxide emissions at the regional and sectoral levels are obtained mainly from regional inventories of greenhouse gases, although in some sectors, they are calculated indirectly from fuel consumption. Then, tax scenarios are proposed that allow simulation of the effects on sectoral prices, levels of production, and emissions at the regional level. The results show that implementing an identical tax rate at the national level has a very heterogeneous impact on the country’s regions, with the regions of Atacama, Antofagasta, Valparaíso, and Biobío being the most affected economies in relative terms since most of the large thermoelectric power plants are located there.