Why did Argentina and Uruguay decide to pursue a carbon tax? Fiscal reforms and explicit carbon prices

Abstract

Since 2014, carbon taxes have been spreading in South America. Counterintuitively, while they are primarily considered climate policies, their adoption has been largely driven by causes unrelated to the reduction of greenhouse gas emissions. The carbon tax policymaking literature has overlooked the causes that trigger the causal mechanisms for adopting carbon taxes and has instead centered on parts of the causal mechanism. Focusing on the very beginning of the process, namely the causes triggering the decision to pursue carbon taxes in Argentina and Uruguay, this study both contributes to the carbon tax policymaking literature and to the burgeoning application of logical Bayesian analysis in qualitative studies. According to previous studies, the pursuit of carbon taxes inherently entails political challenges linked, among others, to its potential regressive impacts and effects on industries, which makes the sudden rise of carbon taxes in Argentina and Uruguay surprising. Based on 26 expert interviews and a desk review, the study applies a logical Bayesian analysis to study potential causes structured around mutually exclusive hypotheses consistent with the carbon tax policymaking literature. It shows that the causes for pursuing carbon taxes in Argentina and Uruguay are not primarily related to mitigation. Instead, Argentina conceived carbon taxation as part of a broader reform of

Market‐based instruments and research infrastructures

“…Taxation is a further pricing instrument that is often considered especially when it comes to greenhouse gas and carbon emissions. While equally considering a pro-environmental policy instrument intended to reduce the negative impact of climate change, Rabbia (2023) analyzes the sudden introduction of carbon taxes in Argentina and Uruguay to show that mitigation is not the primary reason for this instrument choice. Complementing existing studies that primarily focus on financial, political, or environmental reasons for the introduction of carbon taxes, the article draws on logical Bayesian analysis in qualitative research to identify the causes for carbon tax introduction via interviews and desk research.…”