"The side effects of environmental taxes: new evidence of energy poverty in developing countries"

Abstract

"Environmental taxes are used as policy measures to address pollution and encourage sustainable development. However, there are also concerns about their potential side effects. This study investigates the relationship between environmental taxes and energy poverty in 47 developing countries from 2002 to 2020 using panel estimation methods, including the two-step system generalized method of moments and three-stage least squares. The findings demonstrate that environmental taxes are associated with higher energy poverty as household access to clean fuels and technologies for cooking is decreased, particularly in rural areas facing greater infrastructure and affordability constraints. The negative relationship is more pronounced for resource and pollution taxes. Interestingly, better institutional quality can reduce the adverse effects of environmental taxes on energy poverty. Environmental taxes may increase inflation, but renewable energy production may alleviate energy poverty. This paper sheds light on the trade-off between green fiscal instruments and social objectives especially in developing countries. © 2026 Taylor & Francis Group, LLC. Published with license by Taylor & Francis Group, LLC."