The Role of Taxes and Subsidies in the Clean Cooking Transition: A Review of Relevant Theoretical and Empirical Insights

Abstract

United Nations Sustainable Development Goal (SDG) 7.1 sets a target of ensuring universal access to affordable, reliable, and modern energy services by 2030. Unfortunately, many low- and middle-income countries (LMICs) are well off course to meet this target, especially with respect to access to clean cooking energy. Though many challenges impede progress toward use of modern and sustainable energy for cooking purposes, cost barriers are perhaps most significant. Against this backdrop, this brief discusses the role of subsidy and tax policies—levied on both the supply and demand side of this market—in affecting progress toward universal access to clean cooking in LMICs. Moreover, combating a common myth among those opposing subsidies for clean cooking, the brief demonstrates that a “fear of spoiling the market” with such incentives finds little empirical support in the literature. Based on theory and evidence discussed in additional detail, this brief offers recommendations to policy makers.