Research

The Network Origins of Carbon Pricing Regressivity, R&R at AEJ Macro  (September 2025)

with Pedro Cavalcanti Ferreira

This paper studies the distributional impacts of carbon pricing policies using a multisector general equilibrium (GE) model with input-output linkages, heterogeneous agents and segmented labor markets. Households differ in their consumption patterns, labor types, and ownership of equity and capital. Pricing the carbon content of products affects households real income through an expenditure channel, according to the emissions intensity of their consumption baskets, and an earnings channel, as GE responses shift the relative demand for labor types, and returns on profits and rents. Calibrating the model with matched microdata for the Brazilian economy, we find regressive effects stemming from both channels. Ignoring the production networks and the gross complementarity between fuels, inputs and factors leads to a substantial underestimation of both aggregate and distributional effects. The incidence of the policy depends on how the revenue is recycled: expanding targeted social transfers fully offsets the regressive impact, whereas using the revenue to reduce preexisting consumption taxes improves efficiency but does not eliminate regressivity. 

The Economic and Distributional Consequences of Photovoltaic Adoption Incentives in Brazil (June 2025)

with Pedro Cavalcanti Ferreira

This paper uses a multi-sector general equilibrium model with heterogeneous agents to study the distributional effects of Brazil’s photovoltaic (PV) incentive policy. Households represent different income groups across the Brazilian states, having distinct consumption baskets and elasticities of substitution between electricity from the grid and PVs. The model captures both direct and indirect regressive impacts of PV subsidies. Directly, non-adopters face higher electricity tariffs to offset revenue shortfalls from exempt PV adopters. Indirectly, by spending more on electricity and energy-intensive goods, low-income households are disproportionately affected by increased costs passed through supply chains. We estimate an elasticity of substitution between PV and grid electricity at 2.45 for regular consumers and 3.1 for low-income households. Counterfactual simulations find that reducing the cross-subsidy by increasing tariffs on PV electricity and correspondingly decreasing grid tariffs to keep aggregate tax revenue unchanged increases GDP, and leads to proportionally higher income gains for the poorest segments of the population.

The Economic Cost of Meeting Brazil’s Nationally Determined Contribution: a Production Networks Approach (2022)

with Pedro Cavalcanti Ferreira

This paper investigates the economic effects of meeting Brazil’s greenhouse gas emissions cut pledge under the Glasgow Climate Pact for 2030. We develop a multi-sector general equilibrium model with intersectoral input-output linkages and greenhouse gas emissions tailored for the Brazilian economy. To calibrate the model, we construct a comprehensive sector-level dataset incorporating all sources of greenhouse gas emissions eligible for inclusion in the taxing scheme. The carbon price is determined to meet the pledge under distinct deforestation projections. In the presence of production networks, the initially concentrated tax shocks propagate throughout the economy, causing widespread variations in relative input prices. As expected, sectors heavily reliant on taxed pollutant resources, such as Energy and Transport, experience significant declines in production. However, some sectors that are not heavily taxed directly may experience a steep price increase and output fall because many of their inputs are highly pollutant and so intensely taxed. The extent of GDP losses depends on the deforestation scenario, ranging from 0.25% (reflecting the record low deforestation levels of 2012) to 5.71% (corresponding to the 2022 rates). The inclusion of Agriculture & Livestock in the taxation leads to considerably smaller GDP losses.