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

Alexander Krauss

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

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.

Keywords: Energy price reform; Gas tariff increase; Methodological issues; Methods; Poverty; Armenia (search for similar items in EconPapers)
JEL-codes: B4 D12 D60 Q41 Q48 (search for similar items in EconPapers)
Date: 2016-11-01
New Economics Papers: this item is included in nep-cis, nep-ene and nep-reg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (16)

Published in Energy Economics, 1, November, 2016, 60, pp. 244-254. ISSN: 0140-9883

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Journal Article: How natural gas tariff increases can influence poverty: Results, measurement constraints and bias (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:68496

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