Double progressivity of infrastructure financing through carbon pricing - insights from Nigeria

32 Pages Posted: 25 Oct 2017 Last revised: 4 Oct 2021

See all articles by Ira Irina Dorband

Ira Irina Dorband

Mercator Research Institute on Global Commons and Climate Change (MCC)

Michael Jakob

Potsdam Institute for Climate Impact Research

Jan Christoph Steckel

Potsdam Institute for Climate Impact Research; Mercator Research Institute on Global Commons and Climate Change (MCC)

Hauke Ward

Mercator Research Institute on Global Commons and Climate Change (MCC)

Date Written: May 12, 2017

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 analyzes the absolute and relative equity effects of a comprehensive carbon pricing reform 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 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 double progressivity. Lower-income households would bear a relatively smaller consumption burden from carbon pricing, and additionally enjoy greater gains from uniform cash transfers or access to improved water, sanitation, electricity, or telecommunication infrastructure. Additionally, such investments would disproportionally benefit the overall poorer rural population due to larger existing access gaps.

Keywords: carbon pricing; infrastructure investment; distributional effect; sustainable development; microsimulations; Nigeria

JEL Classification: D57; Q52, Q54; O18

Suggested Citation

Dorband, Ira Irina and Jakob, Michael and Steckel, Jan and Steckel, Jan and Ward, Hauke, Double progressivity of infrastructure financing through carbon pricing - insights from Nigeria (May 12, 2017). Available at SSRN: https://ssrn.com/abstract=3059138 or http://dx.doi.org/10.2139/ssrn.3059138

Ira Irina Dorband (Contact Author)

Mercator Research Institute on Global Commons and Climate Change (MCC) ( email )

Torgauer Straße 12-15
Berlin, 10829
Germany

Michael Jakob

Potsdam Institute for Climate Impact Research ( email )

Telegraphenberg
Potsdam, Brandenburg 14412
Germany

Jan Steckel

Potsdam Institute for Climate Impact Research ( email )

Telegraphenberg
Potsdam, Brandenburg 14412
Germany

Mercator Research Institute on Global Commons and Climate Change (MCC) ( email )

Torgauer Straße 12-15
Berlin, 10829
Germany

HOME PAGE: http://https://www.mcc-berlin.net/en/about/team/steckel-jan.html

Hauke Ward

Mercator Research Institute on Global Commons and Climate Change (MCC)

Torgauer Straße 12-15
Berlin, 10829
Germany

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