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How natural gas tariff increases can influence poverty: results, measurement constraints and bias

Krauss, Alexander (2016) How natural gas tariff increases can influence poverty: results, measurement constraints and bias. Energy Economics, 60. pp. 244-254. ISSN 0140-9883

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Identification Number: 10.1016/j.eneco.2016.09.010

Abstract

Energy tariff increases are generally essential to address environmental and fiscal concerns but they can also push households into poverty. This paper estimates the expected poverty and distributional effects of a significant natural gas tariff reform in the context of Armenia that increased the country’s residential tariff by about 40%. It is the first paper in the literature on energy tariff reforms to simultaneously try and control for substitution between all major energy sources (not just some), to take into account the seasonality of consumption over the full annual cycle, and to apply different methods to assess changes in household consumption on natural gas and shifts in natural gas between main and supplementary heating sources. Existing papers thus generally overestimate the potential effects of energy price increases on household welfare. The results here – which face, like any statistical study, a set of important methodological constraints – suggest nonetheless that this significant tariff increase led to an estimated 8% of households shifting away from gas, mainly towards wood, as their heating source. It consequently resulted in an estimated 2.8% of households falling below the national poverty line, while likely also influencing non-monetary human welfare that cannot be well captured econometrically. Finally, methodological assumptions and limitations in assessing these relationships, as well as potential policy implications are outlined.

Item Type: Article
Official URL: http://www.sciencedirect.com/science/journal/01409...
Additional Information: © 2016 Elsevier B.V.
Divisions: CPNSS
Subjects: H Social Sciences > HB Economic Theory
JEL classification: B - Schools of Economic Thought and Methodology > B4 - Economic Methodology
D - Microeconomics > D1 - Household Behavior and Family Economics > D12 - Consumer Economics: Empirical Analysis
D - Microeconomics > D6 - Welfare Economics > D60 - General
Q - Agricultural and Natural Resource Economics; Environmental and Ecological Economics > Q4 - Energy > Q41 - Demand and Supply
Q - Agricultural and Natural Resource Economics; Environmental and Ecological Economics > Q4 - Energy > Q48 - Government Policy
Sets: Research centres and groups > Centre for Philosophy of Natural and Social Science (CPNSS)
Date Deposited: 01 Dec 2016 14:53
Last Modified: 20 Oct 2019 02:32
Funders: Institute for New Economic Thinking, Federal Ministry for Economic Cooperation and Development
URI: http://eprints.lse.ac.uk/id/eprint/68496

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