Forty-five policymakers from Ethiopia, Kenya, Rwanda, Tanzania, and Uganda received hands-on training on the Carbon Price Incidence Calculator (CPIC) in a workshop within the Inclusive Green Economy (IGE) in Practice program in connection with EfD's Annual Meeting.
CPIC is a tool that helps governments assess how carbon pricing affects different income groups and supports the design of fair, inclusive climate policies. It’s developed for 87 countries and covers nearly six billion people worldwide. The CPIC allows policymakers to explore the potential impact of carbon pricing reforms. The training was led by Professor Jan Steckel and Theda Vetter of the Potsdam Institute for Climate Impact Research (PIK) and facilitated by Daniel Slunge from EfD.
Simulates different scenarios
CPIC enables users to simulate multiple scenarios, such as differences between global and national carbon prices, impacts on the electricity and transport sectors, and the effects of various redistribution measures—including reduced consumption taxes, electricity subsidies, or direct cash transfers. The tool compares outcomes across income groups within a country, helping policymakers identify who gains or loses under different policy options.
Practical insights
“The Carbon Pricing Incidence Calculator can help us ensure that fossil fuels have the right price, allowing for fair redistribution to less privileged communities,” said Habtamu Alamayo, EU Cooperation Senior Expert at Ethiopia’s Ministry of Finance.
“In my ministry, especially in the tax policy department, the tool can help design and implement taxes or tariffs on high-emission industries and importers, while promoting fair income distribution.”
For many African countries, carbon pricing and the reform of fossil fuel subsidies are becoming key parts of national climate and fiscal strategies. Such reforms can encourage cleaner energy use and generate much-needed public revenue, but they also pose social risks if not well designed.
“For Ethiopia, for example, we saw during these simulations that a direct cash transfer protects low-income households better from carbon price impacts than an equivalent reduction in consumption taxes,” he added.
The CPIC helps governments anticipate these effects and identify policies that balance climate goals with social protection.
Can guide decisions on climate-smart agriculture
“The flexibility of the CPIC tool makes it easy to gauge the impacts on various income groups under various scenarios,” said Joyce T. Msangi, Senior Forest Officer at Tanzania’s Ministry of Energy.
“It can also guide decisions in climate-smart agriculture, such as assessing who bears more of the cost when carbon prices rise and evaluating compensation or revenue recycling options from green funds to offset negative impacts.”
Participants agreed that tools like CPIC provide a strong foundation for designing fair and effective carbon pricing reforms. They will[3] be essential for aligning climate action with inclusive growth and social protection.
About the IGE in Practice Program
The Inclusive Green Economy (IGE) in Practice program, coordinated by the Environment for Development (EfD) initiative, brings together policymakers and researchers from across Africa to exchange knowledge and tools for green economic transformation. Through regional workshops, applied learning, and peer collaboration, the program helps countries design evidence-based policies that promote both sustainability and equity.