Chile:Technical Assistance Report-An Evaluation of Improved Tax Options

At the request of the Chilean Minister of Finance, a team from the IMF Fiscal Affairs Department (FAD) conducted a capacity development mission in Santiago to evaluate options to improve green taxes in Chile, as part of a general tax reform presented to Congress in July 2022. The mission reviewed existing carbon taxes in the country, including revenue performance, coverage, and selected design issues. It also discussed changes to green taxes that will take effect in 2023, as well as new mitigation tools introduced in the Framework Law on Climate Change. The mission presented the authorities with four different carbon pricing reform scenarios that would bring Chile closer to or in line with its Nationally Determined Contribution (NDC) for 2030, and the legally binding net-zero pledge for 2050. The mission also stated that additional measures under all proposed scenarios, such as improved energy efficiency policies, introduction of feebates schemes and faster adoption of low and zero emission sources for transport, power, and industry, would further contribute to achieve climate goals. The mission used the Climate Policy Assessment Tool (CPAT) to perform the analysis. The tool was subsequently transferred to the authorities through a four-day hands-on capacity development workshop, which was attended by officials from the Ministries of Finance, Energy, Environment, and Transportation.