Lecture Series | Distributional effects of climate policies and decarbonization challenges in low- and middle-income countries (Sinem Ayhan)

Decarbonization of the energy sector is at the center of the policy agenda in line with the goal to limit global warming to 1.5°C set out by the Paris Agreement. Despite this goal, greenhouse gas (GHG) emissions continue rising worldwide. The increase is, in absolute terms, mainly driven by low- and middle-income countries (LMICs). Considering the rapid growth in population, economic output, and energy demand, many LMICs —without further and stronger emission control policies—head towards carbonization of their energy systems rather than decarbonization. Designing and implementing appropriate climate policies in these countries is key to achieving global climate targets. On the other hand, given the severe development challenges faced by these countries, it is imperative to take into account the welfare consequences of such policies before considering their implementation, as there is the risk of pushing more people towards poverty while achieving very limited emission reductions in return. Recently, the world has been witnessing several protests and civil unrest over the globe as an outcome of energy price hikes through unmanaged fossil fuel subsidy reforms or carbon pricing reforms, e.g. in Ecuador and Iran in 2019, Nigeria in 2020, Kazakhstan in 2022. In this regard, the social acceptability of the policies is of vital importance, which could be facilitated by transfer schemes to compensate for the resulting welfare losses. Finding the right instrument requires identifying whom to target and which compensation schemes to introduce. It is, therefore, important to know who bears the burden of the climate policies. Climate policies are not expected to influence every segment of the society equally, rather affect different households differently. The so-called distributional effects of climate policies on households constitute the main focus of this lecture. In this lecture, we will particularly focus on “carbon pricing” as a well-known example of mitigation policies and provide evidence from the literature covering a broad set of LMICs. Throughout the lecture, we will seek an answer to the following questions: Which households face the highest additional costs from carbon pricing? What cost falls on the poorest —arguably, the most important segment to political decisionmakers? What type of transfer mechanisms can be designed to compensate the poor given the institutional set-up in LMICs? What are the potential challenges expected towards a low-carbon development trajectory?

Sinem Ayhan (IOS Regensburg) is a Research Associate in economics at the Leibniz Institute for East and Southeast European Studies (IOS). Her research areas include labor economics and climate change topics in low- and middle-income countries including Turkey.

When?  Monday, 30 May 2022, 18:15 CET

Where?  H19, Sammelgebäude, Universität Regensburg

The lecture series is organized with CITAS.