Double progressivity of infrastructure financing through carbon pricing — Insights from Nigeria

World Development Sustainability, vol. 1, pp. 100011

Abstract

Carbon taxes and fossil fuel subsidy reforms have been recognized as an efficient means to mobilize substantive domestic resources for sustainable development. Yet, despite their advantages compared to other taxes, concerns about potential adverse impacts on poverty and inequality have discouraged many countries from such fiscal reforms. This paper estimates which absolute and relative equity effects a comprehensive carbon pricing reform would have on households within and between income groups in Nigeria. We further analyze the distributional effects of revenues being recycled into basic infrastructure development and social safety nets. We assess the expected consumption effects of six policy packages across rural and urban income groups, combining environmental-extended input-output data with detailed household survey data. Our results suggest that, relative to their income, lower-income households would bear a smaller consumption burden from carbon pricing than high-income households, while enjoying greater gains from uniform cash transfers or access to improved water, sanitation, electricity, or telecommunication infrastructure. Additionally, if spent efficiently, such investments could disproportionally benefit the overall poorer rural population due to larger initial access gaps.

Authors 4

1. Ira Irina Dorband corresponding

   World Bank · Mercator Research Institute on Global Commons and Climate Change · Technische Universität Berlin

   Affiliation as printed

   Department Economics of Climate Change, Technische Universität Berlin, Str. d. 17. Juni 145, Berlin 10623, Germany

   Mercator Research Institute on Global Commons and Climate Change, Torgauer Str. 12-15, Berlin 10829, Germany

   The World Bank, 1818 H Street, NW, Washington DC 20433, United States

2. Michael Jakob

   Mercator Research Institute on Global Commons and Climate Change · Ecologic Institute

   Affiliation as printed

   Ecologic Institute, Pfalzburger Str. 43/44, Berlin 10717, Germany

   Mercator Research Institute on Global Commons and Climate Change, Torgauer Str. 12-15, Berlin 10829, Germany

3. Jan Christoph Steckel corresponding

   Mercator Research Institute on Global Commons and Climate Change · Brandenburg University of Technology Cottbus-Senftenberg

   Affiliation as printed

   Brandenburgische Technische Universität Cottbus-Senftenberg, Chair Climate- and Development Economics, Erich-Weinert-Straße 1, Cottbus 03043, Germany

   Mercator Research Institute on Global Commons and Climate Change, Torgauer Str. 12-15, Berlin 10829, Germany

4. Hauke Ward Aachen Institute of Environmental Sciences (CML)

   Leiden University · Mercator Research Institute on Global Commons and Climate Change

   Affiliation as printed

   Institute of Environmental Sciences (CML); Department of Industrial Ecology; Van Steenis; Einsteinweg 2; 2333 CC Leiden; The Netherlands

   Mercator Research Institute on Global Commons and Climate Change, Torgauer Str. 12-15, Berlin 10829, Germany

   2333 CC Leiden

   Department of Industrial Ecology

   Einsteinweg 2

   Institute of Environmental Sciences (CML)

   The Netherlands

   Van Steenis