Do Regulatory Tariffs Curb Gas Flaring? Evidence from Nigeria

This study examines the impact of flare tariff adjustments on gas-flaring volumes in Nigeria. Utilising a 52-year dataset, this analysis demonstrates that the effectiveness of flare tariffs in reducing gas flaring depends on the stringency of imposed charges. To isolate this effect, this study distinguishes between tariff regimes implemented before and after 2018, a pivotal year marked by the introduction of substantially higher tariffs under revised regulations. The findings indicate that the pre-2018 tariffs had no statistically significant effect on gas-flaring volumes, whereas the post-2018 tariffs led to a statistically significant reduction. Specifically, the pre-2018 tariffs were associated with a negligible reduction in flaring (0.05 percentage points), which was statistically insignificant. By contrast, the post-2018 tariff regime resulted in a 9.26 percentage-point decline in flaring volumes, significant at the 1% level. Additional factors contributing to the flaring reduction include oil production levels, oil prices, and the availability of gas infrastructure. These results highlight the critical role of sufficiently stringent tariff policies in achieving substantial reductions in global gas flaring.