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Incidence and impact: The regional variation of poverty effects due to fossil fuel subsidy reform

Rentschler, J; (2016) Incidence and impact: The regional variation of poverty effects due to fossil fuel subsidy reform. Energy Policy , 96 (C) pp. 491-503. 10.1016/j.enpol.2016.06.025. Green open access

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Abstract

Since fossil fuel subsidy reforms can induce significant distributional shifts and price shocks, effective compensation and social protection programs are crucial. Based on the statistical simulation model by Araar and Verme (2012), this study estimates the regional variability of direct welfare effects of removing fuel subsidies in Nigeria. Uncompensated subsidy removal is estimated to increase the national poverty rate by 3–4% on average. However, uniform cash compensation that appears effective at the national average, is found to fail to mitigate price shocks in 16 of 37 states – thus putting livelihoods (and public support for reforms) at risk. States that are estimated to incur the largest welfare shocks, coincide with hotspots of civil unrest following Nigeria's 2012 subsidy reform attempt. The study illustrates how regionally disaggregated compensation can be revenue neutral, and maintain or reduce pre-reform poverty rates in all states. Overall, it highlights the importance of understanding differences in vulnerability, and designing tailored social protection schemes which ensure public support for subsidy reforms.

Type: Article
Title: Incidence and impact: The regional variation of poverty effects due to fossil fuel subsidy reform
Open access status: An open access version is available from UCL Discovery
DOI: 10.1016/j.enpol.2016.06.025
Publisher version: http://dx.doi.or/10.1016/j.enpol.2016.06.025
Language: English
Additional information: © 2016 The Author. Published by Elsevier Ltd. This is an open access article under the CC BY license (http://creativecommons.org/licenses/by/4.0/).
UCL classification: UCL
UCL > Provost and Vice Provost Offices
UCL > Provost and Vice Provost Offices > UCL BEAMS
UCL > Provost and Vice Provost Offices > UCL BEAMS > Faculty of the Built Environment
UCL > Provost and Vice Provost Offices > UCL BEAMS > Faculty of the Built Environment > Bartlett School Env, Energy and Resources
URI: https://discovery.ucl.ac.uk/id/eprint/1517843
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