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.
[JEL Classification: Q56, Q58, H23, H22].
Keywords: environment; distributional effects, tax revenue, fuel Taxes
Financial support from the Swedish International Development cooperation Agency (Sida) for writing this paper is greatly acknowledged. We would also like to thank our colleagues in Ethiopia, Kenya, Tanzania, Uganda and South Africa for assisting us with background material for the paper. The responsibility for the paper rests with the authors alone.