Energy poverty consequences of aggressive tobacco tax policies

This paper presents the first empirical evidence linking tobacco tax policies to unintended social consequences in the form of increased energy poverty. We focus on Australia, where smokers face some of the world's highest cigarette prices. We analyse an unanticipated aggressive tax regime implemented in 2010 using a difference-in-differences approach with a nationally representative panel dataset covering 14 years. Our findings indicate significant increases in the incidence of energy poverty among smoking households. Relative to the smoking cohort's pre-policy mean, subjective reports of heating difficulties rose by 24 %, while objective measures increased by 38 % (10 % energy-burden threshold), 15 % (twice-median burden), and 26 % under the Low-Income High Costs (LIHC) measure. Mechanism analyses indicate that reduced energy expenditures and compromised financial stability exacerbate the observed energy poverty. The impacts were particularly pronounced among lower-income families, heavy smokers, and individuals who find quitting hard. This research highlights the complex trade-offs involved in aggressive tobacco taxation and emphasises the need for targeted measures to mitigate the negative consequences on the energy well-being of vulnerable smokers and their families.