Colombia’s Carbon Tax and Offsetting Mechanism: A Synthetic Control Evaluation of Emissions and Deforestation

Diplôme Master Colombia’s Carbon Tax and Offsetting Mechanism: A Synthetic Control Evaluation of Emissions and Deforestation eng 2025-11-05 author Ra Jeonghun 411579 director Balsiger Jörg 716235 Service enseignement, recherche, administratif et technique (SdS) (SCSPS) 54 In 2017, Colombia introduced a carbon tax with an offsetting mechanism that initially allowed entities to cover up to 100 percent of obligations with certified carbon credits, reduced to 50 percent in 2023. Despite being the first hybrid carbon pricing policy in Latin America, its impacts have yet to be thoroughly evaluated. To address this gap, this study applies the Synthetic Control Method (SCM) to assess the effects of Colombia’s hybrid carbon tax from 2017 to 2023. The results show that CO₂ emissions from fossil fuels and industrial processes, excluding land-use change, initially declined but later rebounded, ultimately surpassing the synthetic counterpart by an average of −0.086 metric tons per capita. CO₂ emissions from oil, more directly targeted by the tax, saw only a short-lived and insignificant reduction of −0.064 metric tons per capita. Tree cover loss also remained slightly above that of the synthetic counterpart, averaging 0.054 percentage points higher. Two main factors help explain the policy’s limited effectiveness. First, the relatively low tax rate and broad exemptions, especially the exclusion of coal, likely weakened the price signal, a situation worsened by increased fossil fuel subsidies during COVID-19 and falling carbon credit prices after 2021. Second, systemic shortcomings in REDD+ projects, including limited institutional capacity, misaligned incentives, weak enforcement, and low local engagement, likely further reduced their credibility and impact. These findings suggest that Colombia’s hybrid carbon pricing policy has not yet reached its full mitigation potential, underscoring the need for ongoing monitoring and targeted reforms. Colombia Carbon tax Offsetting mechanism Synthetic Control Method (SCM) Deforestation CO₂ Emissions Dewey 354.3 MIHDS Master in Innovation, Human Development and Sustainability 199 Institut de la gouvernance de l'environnement et du développement territorial TF false aa9d143b-be14-4e7d-8014-bcbcc1a8df58 Master thesis Public A_JeonghunRa.pdf 2118737 application/pdf 963cc2f296800e3b92da2eddfe713a676777d9e5541126a6a7b1c32586d76768 openAccess Faculté des sciences de la société / Institut de la gouvernance de l'environnement et du développement territorial

Title	Published in	Access level	OA Policy	Year	Views	Downloads

Colombia’s Carbon Tax and Offsetting Mechanism: A Synthetic Control Evaluation of Emissions and Deforestation				2025	157	635

Archive ouverte UNIGE

Ra, Jeonghun