April 6, 2026

 

Rodrigo Wagner and Claudio Agostini warned that current prices do not incorporate the costs of pollution and that gradual adjustments would help protect households and strengthen public spending.

In the discussion “Decisions that Impact: Economy and Government Measures in Chile,” organized by the Business School in conjunction with the Faculty of Engineering and Sciences at UAI, Rodrigo Wagner and Claudio Agostini, economists and professors at the university, analyzed the current challenges of fuel policy in Chile, addressing the role of subsidies and the economic implications these decisions have on the country’s functioning.

“Money has alternative uses; it’s not free. So we are collecting taxes that distort the economy to subsidize something that is already distorted and polluting. And that money is less money for housing, health, and education. I don’t know if subsidizing gasoline is a priority for a country like Chile,” Agostini stated.

Agostini emphasized that taxes should be higher for the most polluting fuels and that the government had the opportunity to raise the tax on diesel fuel, but failed to do so. He further explained that “prices are the correct signal for decision-making, and in the case of fuels, there is the additional cost of pollution, which the current price does not reflect. Other energy sources become more profitable as oil covers the costs it generates.”

Both academics also suggested that a solution was a gradual increase in prices, because sharp economic shocks generate adjustments that can be costly. “Household spending capacity is very inelastic in the short term; I can’t adjust my consumption. People need time for the oil demand curve to adjust so as not to experience so many disruptions,” Wagner explained. For him, the answer was to raise prices in three phases.

Finally, Wagner elaborated that the country’s current debt is occupying a significant portion of the budget, making it necessary to better balance income with expenses.