Reviewing, reforming, and rethinking global energy. Energy subsidy reform imf elibrary international monetary fund. Fiscal reform, especially energy subsidy reform also a recurring objective, but effectuated in 20152016. This book provides the most comprehensive estimates of energy subsidies currently available for 176 countries and an analysis of how to do energy subsidy reform, drawing on insights from 22. Assessing the readiness of social safety nets to mitigate the impact of energy subsidy reform why reform subsidies. Nevertheless, barriers to reform persist and subsidies remain high. The world trade organization defines a subsidy as a financial contribution by a government, or agent of a government, that confers a benefit on its recipients kojima and koplow, 2015. Estimates of energy subsidies in china and impact of. In most cases, reforms have been part of a broad based fiscal. The political economy of energy subsidy reform public. The world banks mely assistance provided the tools and models to project the impacts of the reform, convincing the government that energy sec. All these factors are critical for achieving access to energy for all. Pahal has increased efficiency and reduced leakages compared to the previous inkind subsidy regime, resulting in significant fiscal savings for the government at fraction of the cost of the program. So how can we better link energy efficiency and subsidy reform.
Energy subsidies are aimed at protecting consumers, however, subsidies aggravate fiscal imbalances, crowd out priority public spending, and depress private investment, including in the energy sector. Saudi arabia and the uae are leading the gcc in raising energy prices and cutting subsidies. In fy 2016, nearly half 45% of federal energy subsidies were associated with renewable energy, and 42% were associated with energy. An opportunity for fuel subsidy reform by keith benes andrew cheon johannes urpelainen joonseok yang october 2015. Fossil fuel subsidies and sustainable energy for all faculty of. Authors analysis using data from the kuwait government finance statistics ministry of planning. The recent surge in international energy prices, combined with incomplete pass through to domestic prices, has prompted calls to phase out energy subsidies. Energy pricing reform has also gained ground across major oil exporting economies, as high subsidies were blamed for aggravating the fiscal challenges caused by the collapse of the oil price in mid2014. Is energy subsidy reform in an oilexporting small economy. The report starts by presenting the numerous arguments for reducing energy subsidies, both at a general level and for myanmar in particular. Data feed into the analysis of the costs and benefits of reform. Evaluating energy subsidies in the arab world 24 3.
The program encompassed a sharp in crease in the price of gasoline and diesel oil. Quantifying impacts of energy subsidy removal as a. The united nations and international energy agency define an energy subsidy as any measure that keeps prices for consumers below. Most current federal subsidies support developing renewable energy supplies primarily biofuels, wind, and solar and reducing energy consumption through energy efficiency. Energy subsidy reform lessons and implications oecd. Gaining in energy subsidy reform for the purpose of this document, energy subsidies can be defined as any government action that lowers the cost of energy production, raises the revenues of energy producers or lowers the price paid by energy consumers. Analysing energy subsidies in the countries of eastern europe oecd. Saudi arabia has maintained a policy of providing energy products at a subsidized price to domestic consumers for decades. The political economy of energy subsidy reform gabriela inchauste and david g.
Recognizing that low oil prices can mitigate the increase in consumer bills caused by subsidy reform, ten countries have, since 2014, completely eliminated subsidies on at. Informed discussion and debate among stakeholders are crucial. Indias lpg reform is a rare case of success in achieving reform in the difficult area of energy subsidy reform. This book provides 1 the most comprehensive estimates of energy subsidies currently available for 176 countries and 2 an analysis of how to do energy subsidy reform, drawing on insights from 22 country case studies undertaken by the imf staff and analyses carried out by other institutions. Abstract this book proposes a simple framework for understanding the political economy of subsidy reform and applies it to four. Section 1 traces the e volution of subsidies in jordan in recent times. The larger number of studies on fuel subsidies reflects the wider availability of. Nevertheless, barriers to reform persist and subsidies. Over this period, energy subsidies on oil accounted for 65. This paper provides a detailed picture of the indias reform of household subsidies for the purchase of lpg cooking gasthe largest cash transfer program in the world. Case studies on energy subsidy reform in subsaharan africa. And while conventional energy policies are gender neutral, energy subsidy policies are likely to affect men and women differently.
To begin, defining an energy subsidy can be fraught with difficulty. While aimed at protecting consumers, subsidies aggravate fiscal imbalances, crowdout priority public spending, and depress private investment, including in the energy sector. Economic brief reforming energy subsidies in egypt. Analysis of international data on energy subsidy reform. Contrary to the subsidy reform plan, the volume of iranian subsidies given to its citizens on fossil fuel, which increased 42. Lessons and implications executive summary energy subsidies have wideranging economic consequences. Diversification effects of energy subsidy reform in mena. Where does social protection fit in the subsidy reform puzzle. Electricity subsidies and cost recovery tariffs 3 this subsection gives estimates of. The distributional impacts of reform would depend on how important the subsidized items are to consumers in terms of their expenditures on those items.
They are expensive for governments and can have harmful environmental and social effects. This booklet draws on recent work on energy subsidy reform carried out by the united nations environment programme unep and the international energy agency iea. The magnitude of the effect of energy subsidy reform policies depends on the extent of the reform and the relevant importance of the subsidy in household budget. While aimed at protecting consumers, subsidies aggravate fiscal.
In the absence of reform, the value of those subsidies will tend to rise. Ehs in the countries of eastern europe, caucasus and central asia eecca. Subsidy reform can level the playing field for renewable energy. S gvm p a petroleum corporation egpc that keeps prices of oil and gas below the price that the government pays to the foreign partners involved. After oil price in 2014, energy subsidy reform was presented as. This study simulates the macroeconomic and distributive impacts of real proposed by local policy makers energy subsidy reforms in egypt and jordan. Pdf poorly implemented energy subsidies are economically costly to taxpayers and damage the environment. Thus, the energy price mechanism is at the core of energy reform, and energy subsidies are an important determinant of energy prices.
Pdf fuel conservation effect of energy subsidy reform in. There is some confusion about what an energy subsidy actually is. Lessons and implications benedict clements fiscal affairs department international monetary fund november 2014 this presentation represents the views of the authors and. Quantifying the impacts of energy price reform on living. Energy subsidy reform and poverty in arab countries. In the past few years, the country has gone through great efforts to reform inefficient fossil fuel subsidies. Energy price reform is but one element of several interrelated components in a sustainable energy strategy, which include investment in energy efficiency and alternative energy, oxford energy forum contents mena energy pricing reforms subsidies and the political economy of wealthsharing in the mena steffen hertog 5. Energy subsidies paper unfccc final draft 10 june 2007. Assessing the political economy of energy subsidies to support.
The prospects for energy subsidies depend entirely on whether and how governments decide to reform their energy policies. Subsidy reform and sustainable development political economy aspects oecd sustainable development studies unsustainable subsidies are pervasive in the industry, agriculture, transport and energy sectors of most oecd countries. Raising ambition through fossil fuel subsidy reform iisd. Victor, editors directions in development public sector governance. Lessons drawn from reforms of energy subsidies weforum. This paper investigates the fuel conservation effects of the reform in iran using a homothetic translog cost function that provides. Energy subsidy reform in mexico has become a topic of high public and political importance. Readiness of social safety nets to mitigate the impact of. The report provides an overview of both methodological and political economy aspects of ehs reform that can inform policy and technical debates. The process of building socially acceptable subsidy reform packages can be informed by assessing the impact of energy subsidy removal on different income groups.
After identifying electricity pricing as the main area for potential energy subsidy reform in myanmar, and. To prevent further increases in energy consumption, the iranian government commenced energy subsidy reform in 2010. As shown by international experience, efforts to reform energy subsidies have a mixed record of success. Reform of energy subsidies in egypt 4 e nergysub idw o tc h l2 05. It summarizes in nontechnical language the central issues related to energy subsidies and key messages for policy makers looking to reform subsidy programmes. Sustaining fuel subsidy reform council on foreign relations. Pdf energy subsidies have wideranging economic consequences. Use the free adobe acrobat reader to view this pdf file. The case for energy subsidy reforms was based on the fundamental argument that poorly targeted energy. The 2014 world bank paper titled transitional policies to assist the poor while phasing out inefficient fossil fuel subsidies was also essential to this work. Reforming energy subsidies linking renewable energy. In 2017, it completed the reform of subsidies to diesel, gasoline and liquefied petroleum gas lpg, which cost up. The gender energy poverty nexus fatma elhamidi working paper 1055 october 2016 this research has benefited from the financial contribution of erf as part of the erf. Research competition gender and social protection 20152016.
Clean energy subsidy swapstaking some of the savings from subsidy reform and investing it into energy efficiency or renewable energy is a highly promising mechanism to achieve this. The international literature has found that energy subsidy removal may be regressive or progressive, that is it may cost poor households a larger. Energy subsidies have wideranging economic consequences. Key to reforming fossilfuel subsidies is making information on support available to decision makers and the broader public. The narrow and perhaps most commonly used definition of an energy subsidy is a direct cash payment by a government to an energy producer or consumer. Assessment framework esraf, an initiative of the energy sector.
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