Carbon Policy, the Green Transition, and Inflation Dynamics

Seminario de investigación del IIEP
Carbon Policy, the Green Transition, and Inflation Dynamics

Expositora | Victoria Nuguer | ITAM

Abstract
We study the effects of carbon taxes on inflation dynamics with a focus on a margin at the core of the green transition: green technology adoption. We build a New Keynesian model with environmental externalities and an energy sector that incorporates endogenous green technology adoption in both the goods and the energy sectors. Calibrating the model to European Union data, we show that for the same carbon tax increase in the goods and energy sectors and the same sectoral emissions shares, raising the tax on emissions from the goods sector leads to a smaller reduction in emissions, a larger increase in output, and a smaller increase in headline inflation compared to raising the tax on emissions from the energy sector. Further model analysis reveals goods-producing firms’ ability to adopt green technologies plays a key role in explaining the positive output and inflation effects of carbon taxes in the goods sector in the data, with green technology adoption in the energy sector playing an out-sized role in reducing emissions. More broadly, our work highlights the importance of green technology adoption across sectors for understanding the quantitative impact of carbon taxes on output and inflation along the transition to a lower-carbon environment.

Coautora| Alan Finkelstein Shapiro | Tufts University

Sobre la expositora
Victoria Nuguer is an Assistant Professor in the Center for Economic Research (CIE) at ITAM since 2024. She was a Senior Economist at the Inter-American Development Bank (IDB) from May 2017 until February 2024, where she has worked on macroeconomic and financial policy issues across Latin America and the Caribbean. She received her Ph.D. in Economics from École Polytechnique Fédérale de Lausanne in Switzerland and her bachelor’s degree from the Universidad de Buenos Aires in Argentina. Her research interests lie in macroeconomics and international finance, with a focus on financial transmission mechanisms, dynamic stochastic general equilibrium (DSGE) models, and the interaction between monetary and macroprudential policy. Her work has been published in leading journals such as the American Economic Journal: Macroeconomics and the Review of Economic Dynamics. Prior to joining ITAM, Victoria held research positions at the Bank of Mexico and contributed extensively to policy work at the IDB.

Lugar | FCE-UBA | Aula Olivera