# 1 Introduction

<mark>Transport is a major contributor to climate change, accounting for 37 percent of global CO</mark> 2 <mark>emissions from end-use sectors (</mark> IEA, 2022). <mark>More alarmingly, transport is the fastest growing source of CO</mark> 2 <mark>emissions, especially in low- and middle-income countries, due to rapid urbanization and increasing motorization rates (</mark> Sims & Schaeffer, 2014) <mark>. Despite technological improvements, urban transport— currently accounting for about 8 percent of world energy use—is expected to double its energy consumption by mid-century (</mark> IEA, 2013). <mark>Curbing emissions from urban transport is essential to achieving net zero emissions by 2050 and to limiting</mark> globa <mark>l warming to well below 2°C as called for in the P</mark> aris <mark>Agreement.</mark> Carbon pricing, including carbon taxes and fuel excise taxes, is widely recognized in the economics literature as a cost-effective policy instrument to incentivize carbon abatement (Climate Leadership Council, 2019). A carbon tax sets a price on carbon by specifying a tax rate on the carbon content of fossil fuels (Pigato, 2019). In the transport sector, carbon taxes, like fuel excise taxes, effectively raise fuel prices, thereby reducing demand for overall travel, discouraging the use of private vehicles, and incentivizing other modes of travel or a shift to cleaner alternatives (Leard et al., 2020). However, while carbon pricing is an effective tool for shifting behavior towards low-carbon alternatives, there can be unintended negative socioeconomic impacts, especially in developing countries where there are higher levels of economic vulnerability and income inequality, and lower-cost alternatives often are not available (Carbon Pricing Leadership Coalition, 2020). As a result, carbon pricing policies can evoke strong public opposition and risk being withdrawn before being implemented.<sup>1</sup> Other less controversial policies, such as transit subsidies, could also help achieve a shift from cars to lower emitting transport modes. However, these have also been found to be associated to negative outcomes, such as a decrease in the quality of transit services, and they would in any case entail fiscal transfers, which may not be an option in countries with limited financial resources. This study, therefore, is focused on the impact of a carbon price induced increase in fuel prices on transit accessibility to jobs.

In many developing-country cities, low accessibility to economic opportunities contributes to fragmented urban labor markets, reduced productivity, and negative social outcomes (Franklin, 2018; Gulyani et al., 2010; Lall et al., 2017; Venables, 2017). Improving access to employment opportunities in cities is therefore key to achieving efficient labor markets, enhancing agglomeration economies, and ensuring inclusive economic growth. If a carbon or fuel excise tax is implemented uniformly (i.e., without exempting less carbon-intensive modes such as public transit) and the increase in fuel prices translates into a fare hike in public transit, carbon pricing, while incentivizing reduced use of cars, could potentially also reduce affordability of transit services and disrupt labor markets. Understanding and quantifying the potential impact of carbon pricing on access to employment is important to inform the development of mechanisms by which negative impacts can be mitigated, especially as an increasing number of low- and middleincome countries are considering carbon pricing policies (World Bank, 2022) or have commissioned carbon pricing studies (e.g., Telaye et al., 2019).

> 1 Examples include the gilets jaunes protests in France which led the government to abandon the planned fuel tax increase, street protests in Ghana following the government’s attempts at implementing a fossil fuel subsidy reform (Maria Vagliasindi, 2012), and protests and demonstrations in the Islamic Republic of Iran after the government introduced gasoline rationing and price hikes.

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