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Implementing energy subsidy reforms : evidence from developing countries (English)

Poorly implemented energy subsidies are economically costly to taxpayers and damage the environment through increased emissions of greenhouse gases and other air pollutants. Energy subsidies also create distortive price signals and result in higher energy consumption or production as well as barriers to entry for cleaner energy services. Subsidies to consumption, by lowering end-use prices, can encourage increased energy use and reduce incentives to conserve energy efficiently. Universal energy-price subsidies tend to be regressive because benefits are conditional upon the purchase of subsidized goods and increase with expenditure. This report selected a representative sample of case studies in 20 developing countries, based on a number of criteria, including the countries' level of development (and consumption) and energy dependency (distinguishing between net energy exporters and importers). The case studies have been selected on the hypothesis that energy dependence and per capita income appear to be the key drivers of subsidy reforms in developing countries. Of the two criteria, energy dependence is expected to be the most powerful determinant of the choice to engage in energy reforms, whereas the level of per capita income may pose different challenges in relation to the distributional impact of such reforms on the poor. Energy net importers are expected to have more incentives to undertake energy subsidy reforms when the fiscal burden of such subsidies reaches a significant percentage of Gross Domestic Product (GDP), particularly when there are already macro unbalances related to high thresholds of public budget and debt. Low- and middle-income countries are expected to display a larger impact of energy subsidy reforms on consumption. This impact reflects the opportunities to influence future behavior rather than current consumption trends because of inertia, vested interests, and the presence of affordability issues.

Details

  • Author

    Vagliasindi, Maria

  • Document Date

    2012/10/31

  • Document Type

    Publication

  • Report Number

    73518

  • Volume No

    1

  • Total Volume(s)

    1

  • Country

    World,

  • Region

    The World Region,

  • Disclosure Date

    2012/11/07

  • Disclosure Status

    Disclosed

  • Doc Name

    Implementing energy subsidy reforms : evidence from developing countries

  • Keywords

    adulteration of gasoline with kerosene;energy net importer;price petroleum product;Economic Policy and Debt;annual per capita income;millennium development goal;increase in income inequality;difference in income;net exporter;liquefied natural gas;net energy exporter;liquefied petroleum gas;Access to Electricity;fossil fuel subsidy;household survey data;electricity distribution company;conditional cash transfer;Environment & Energy;privileges and immunity;rate of change;sustainable energy;development research group;patterns of consumption;ministries of finance;Development Sector Unit;internal combustion engine;damage to vehicle;wholesale electricity market;production of electricity;high energy consumption;targeted social assistance;oil marketing companies;energy service provider;oil marketing company;inequality of income;barrier to entry;energy subsidies;public debt;Learning and Innovation Credit;fiscal situation;economic crisis;budget surplus;richer countries;gross debt;budgetary subsidy;budgetary subsidies;representative sample;energy importer;higher-income countries;fuel use;Electric Power;gasoline diesel;petroleum fuel;budgetary deficit;automotive diesel;fiscal performance;budgetary situation;primary energy;retail price;budget increase;electricity production;energy market;vulnerable group;energy reform;budget deficit;commercial purpose;fiscal burden;air pollutant;price signal;cleaner energy;end-use price;diesel use;Political Economy;vehicle performance;kerosene prices;Economic Management;gasoline use;energy specialist;energy economist;special tax;market reform;public budget;vested interests;current consumption;electricity tariff;energy ministries;

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Citation

Vagliasindi, Maria

Implementing energy subsidy reforms : evidence from developing countries (English). Directions in development ; energy and mining Washington, D.C. : World Bank Group. http://documents.worldbank.org/curated/en/566201468177234043/Implementing-energy-subsidy-reforms-evidence-from-developing-countries