Environmental Fiscal Reform in East and Southern Africa and its Effects on Income Distribution

The paper reviews the current use of instruments for environmental fiscal reform (EFR) in selected East and Southern African countries and analyzes the effects on income distribution from fuel taxes. Theoretical arguments for introducing taxes on environmental and fiscal grounds as well as potential trade-offs between environmental and fiscal objectives are discussed.

While most African countries have introduced several environmental taxes, our analysis indicates there is a considerable potential to improve both revenue generation and environmental benefits. Building on detailed case studies of fuel consumption, we find that fuel taxes appear to be progressive and not regressive as often claimed.