CEPAL Review

Cepal Review is the leading journal for the study of economic and social development issues in Latin America and the Caribbean. Edited by the Economic Commission for Latin America, each issue focuses on economic trends, industrialization, income distribution, technological development and monetary systems, as well as the implementation of economic reform and transfer of technology. Written in English and Spanish (Revista de la Cepal), each tri-annual issue offers approximately 12 studies and essays undertaken by authoritative experts or gathered from conference proceedings.

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Differential fuel taxes and their effects on automobile demand

Fuel taxation policy in Chile has always been to keep taxes on diesel lower than those on gasoline. The proportion of automobiles with diesel engines has grown considerably as a result. Just 20% of diesel engine emissions are equivalent to 80% of gasoline engine emissions, and this affects the level of externalities associated with automobile use, especially in cities such as Santiago where pollution levels are high. This study estimates the effect of the fuel tax differential on automobile demand. The findings indicate diesel automobile demand elasticities of -3.4 and 2.1 with respect to the price of the vehicle and the tax differential. The scale of these effects means there is scope for substantial emissions cuts by way of tax changes to equalize gasoline and diesel tax rates and create a specific tax on diesel automobiles.

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