Carbon pricing and household welfare: evidence from Uganda

Abstract Policymakers frequently voice concerns that carbon pricing could impair economic development in the short run, especially in low-income countries such as Uganda. Using a consumer demand system for energy and food items, we assess how households’ welfare, and demand for food and energy, would respond to a carbon price of USD40/tCO2. We find welfare losses of 0.2–12 per cent of household expenditure on food and fuel, due to the carbon price. Average demand for electricity and kerosene decline by 11 and 20 per cent respectively, while firewood demand rises by 10 per cent on average. We observe shifts within food consumption baskets, with declines in the demand for meat & fish, and vegetables, alongside an increase in cereal consumption. Household nutrition is adversely impacted, with declines in protein and micronutrient intake across the population. Complementary social protection policies such as cash transfers are therefore required to ease adverse effects on economic development in Uganda.

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Publication Details

Journal
Environment and Development Economics
Published
2024-10-28
DOI
https://doi.org/10.1017/s1355770x24000214
Citations
5
Primary Topic
Energy, Environment, and Transportation Policies
Type
article
Field-Weighted Citation Impact
0.51

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article

Carbon pricing and household welfare: evidence from Uganda

Jan Christoph Steckel, Sinem H. Ayhan, Michael Jakob, Raavi Aggarwal
5 citations
Environment and Development Economics
Energy, Environment, and Transportation Policies
0.51
article

Carbon pricing and household welfare: evidence from Uganda

Jan Christoph Steckel, Sinem H. Ayhan, Michael Jakob, Raavi Aggarwal
article en
5 citations

Abstract

Abstract Policymakers frequently voice concerns that carbon pricing could impair economic development in the short run, especially in low-income countries such as Uganda. Using a consumer demand system for energy and food items, we assess how households’ welfare, and demand for food and energy, would respond to a carbon price of USD40/tCO2. We find welfare losses of 0.2–12 per cent of household expenditure on food and fuel, due to the carbon price. Average demand for electricity and kerosene decline by 11 and 20 per cent respectively, while firewood demand rises by 10 per cent on average. We observe shifts within food consumption baskets, with declines in the demand for meat & fish, and vegetables, alongside an increase in cereal consumption. Household nutrition is adversely impacted, with declines in protein and micronutrient intake across the population. Complementary social protection policies such as cash transfers are therefore required to ease adverse effects on economic development in Uganda.

Environment and Development EconomicsVol. 30(1)
Mercator Research Institute on Global Commons and Climate Change (DE), Climate Analytics (DE), Leibniz Institute for East and Southeast European Studies (DE), Technische Universität Berlin (DE), Brandenburg University of Technology Cottbus-Senftenberg (DE), Indian Statistical Institute (IN)
Bundesministerium für Bildung und Forschung
Openalex Percentile: Top 43%
Energy, Environment, and Transportation Policies
0.51
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