Abstract:-

Climate change mitigation is often assumed to be cheaper in developing countries. However, existing analyses frequently ignore the presence of other externalities such as indoor air pollution. Using detailed household data for six representatively selected countries, we examine the demand responses of biomass consumption to higher prices of electricity, LPG and kerosene. We show that for these fuels, carbon pricing can generate substantial domestic health costs from increasing indoor air pollution that exceed the global benefits of climate change mitigation in four out of six countries. Our results challenge the notion that climate change mitigation is usually cheaper in low-income countries than in high-income countries. The design of climate policies needs to take contextual factors into account, in particular for fuels used by the poorest.