Energy subsidies have wideranging economic consequences. To gain insight into the history of energy incentives, the nuclear energy institute nei asked man. The political economy of energy subsidy reform english. So if the government wanted lots of carrots for some reason, they might offer farmers an extra payment per kilogram of carrots they grow, on top of the normal price that they get in the market.
This book proposes a simple framework for understanding the political economy of subsidy reform andapplies it to four indepth country studies covering more than 30 distinct episodes of. They may counter the shortfall in the availability of such goods with direct subsidies to producers of these commodities. Energy subsidy reform is urgently needed in many countries for domestic reasons local pollution is a key public concern public finances are under large pressure this will also contribute to carbon emission reductions help countries with pledged carbon reductions under the paris climate agreement. Enhancing equity for children in the context of the reform of.
Recent developments in egypts fuel subsidy reform process. The history of wind energy subsidies world economic forum. Mar 24, 2017 subsidies for the production and consumption of energy have come to the forefront of international debates in recent years. Expanding the renewable energy industry through tax. Subsidies for the production and consumption of energy have come to the forefront of international debates in recent years. Their announcement was therefore seen as a sign of consolidation. Subsidies also distort resource allocation by encouraging excessive energy consumption, artificially promoting capital.
This was about 50 times more subsidy support than received by coal and natural gas combined, yet wind and solar together produced less than five percent of total u. How to do subsidy reform identify ingredients for successful subsidy reform from 22 country case studies 14 on fuel, 7 on electricity, and 1 on coal broad regional coverage 7 from ssa, 2. A panel discussion with a number of nongovernmental perspectives followed liptons introduction. Often, energy subsidies disproportionately benefit higher income groups, while diverting public funds. Energy demand has low price elasticity and high income elasticity in india. International energy agency iea 1999 has defined energy subsidy as any government action concerning primarily the energy sector that lowers the cost of energy production and raises the price received by energy producers or lowers the price paid by energy consumers. Rethinking electricity tariffs and subsidies in pakistan.
Put simply, a subsidy is an extra payment on top of the normal amount of money you get for producing or selling something. Energy subsidies may be direct cash transfers to producers, consumers, or related bodies, as well as indirect support mechanisms, such as tax exemptions and rebates, price controls, trade restrictions. Case studies on energy subsidy reform in subsaharan africa. How to do subsidy reform identify ingredients for successful subsidy reform from 22 country case studies 14 on fuel, 7 on electricity, and 1 on coal broad regional coverage 7 from ssa, 2 from e. The imfs online learning program receives financial support from the government of japan. Research competition gender and social protection 20152016. A brief political economy of energy subsidies in the middle. Government subsidy policy and its impact on efficiency and economic growth. The zero subsidy bid is a breakthrough for the cost competitiveness of offshore wind and it. Jan 24, 2017 he was able to manage the reform for two reasons. The recent surge in international energy prices, combined with incomplete pass through to domestic prices, has prompted calls to phase out energy subsidies.
Energy subsidy the energy input per calorie of food producedenergy input per calorie of food obtained is greater for modern agricultural practices than for traditional agriculture. Level of international energy prices decide the impact of subsidy removal in the domestic market. The issue of fossil fuel subsidies has captured the global political agenda ever since 2009, when the leaders of the group of 20 g20 pledged to phase out inefficient subsidies because they encourage wasteful consumption, reduce our. Wind farm handouts are even more generous when state and local tax credits are factored in. The research was based around two overall research questions namely how do existing liquified petroleum gas. When benefits are concentrated, satisfying or isolating interest groups with alternative policies is an important condition for effective reform. 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. Findings and recommendations executive summary the report examines from a gender perspective the impact of subsidies and reform to cooking gas in india. Incorporated as a notforprofit foundation in 1971, and headquartered in geneva, switzerland, the forum is tied to no political, partisan or national interests. That same year, in the eecca region alone fossil fuel subsidies for consumers oil, coal, gas and electricity may have totalled about usd 2 billion in. We investigate the implications of energy subsidy reform on price and consumption.
Like elsewhere, energy resources are subsidized in india to enable consumers, especially poor and needy, to. Government subsidy policy and its impact on efficiency and. Incorporated as a notforprofit foundation in 1971, and headquartered in geneva, switzerland, the forum is tied to no political. Recent developments in egypts fuel subsidy reform process 1 1. Asia, 3 from mena, 4 from lac, and 3 from ceecis 28 reform episodes 12 successful, 11 partially successful, and 5 unsuccessful. Energy subsidy reform the design of subsidy rules this training material is the property of the international monetary fund and is intended for use in imf institute for capacity development courses.
Subsidy for renewable energy projects cags website. During the 90s, most countries in latin america and the caribbean region lcr supported by the world bank, implemented a marketoriented reform in the energy sector to promote competition, economic regulation and greater private sector participation, as the main instruments to improve the quality, reliability and efficiency of energy services, and improve the governments fiscal position and. Furthermore, subsidy reform can be complex when it involves efforts to reduce inefficiencies and production costs, as is often the case for the electricity sector. Energy subsidies are measures that keep prices for consumers below market levels or for producers above market levels, or reduce costs for consumers and producers. David lipton, first deputy managing director of the international monetary fund, presented the new imf study energy subsidy reformslesson and implications at the peterson institute on march 27, 20.
Supported by the global subsidies initiative gsi and coorganized with the united states and the world bank, this years event was held during the international monetary fund imf and world bank spring. The eeg surcharge has been the financial engine fueling germanys aggressive deployment of renewable energy. While aimed at protecting consumers, subsidies aggravate fiscal imbalances, crowdout priority public spending, and depress private investment, including in the energy sector. Beginning in 2014, the energy sector management assistance program esmap, through its energy subsidy reform facility, has provided technical advice and analytical support to the government of egypt in the reform and capacity building processes of its power sector. On average, the burden of subsidy reform is neutrally distributed across income groups. Dong energy breaks subsidy link with new offshore wind. Nevertheless, barriers to reform persist and subsidies remain high. Many governments in developing countries adopt price controls for basic consumer goods. 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. Then, without losing energy potential, natural gas and oil can be stored and eventually turned into energy through combustion. Fossil fuel energy is the primary energy subsidy for largescale modern food production used to produce fertilizers and pesticides, to operate tractors, to pump water for irrigation, and to harvest food.
Consumer subsidies arise when the prices paid by consumers are below a benchmark price. Energy subsidy reform lessons and implications paperback. Renewable subsidies for wind and solar energy are already. Bartlett, marsha blackburn, and jason chaffetz for an update to a 2008 report prepared. Energy subsidy reform is urgently needed in many countries for domestic reasons local pollution is a key public concern public finances are under large pressure this will also contribute to carbon emission reductions help countries with pledged carbon reductions under the. During the 90s, most countries in latin america and the caribbean region lcr supported by the world bank, implemented a marketoriented reform in the energy sector to promote competition, economic regulation and greater private sector participation, as the main instruments to improve the quality, reliability and efficiency of energy services, and improve the governments fiscal. Energy subsidies in the middle east and north africa. The policy of maintaining tight control of domestic energy prices has been widely spread in the middle east and north africa. The negative impact of subsidy reform on childrens living conditions. The energy subsidy reform online community esroc brings together government officials from around the world, experts from the world bank group and from other international organizations interested in reforming energy subsidies.
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. The world economic forum is an independent international organization committed to improving the state of the world by engaging business, political, academic and other leaders of society to shape global, regional and industry agendas. This new activity will support analysis to understand the incidence of current energy subsidies in nepal and estimate the poverty and social impacts of proposed tariff and subsi. Subsidies also distort resource allocation by encouraging excessive energy consumption, artificially promoting capitalintensive industries, reducing incentives. 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. With fossil fuel subsidies being a major contributor to the deficit, energy subsidy reform was a strategic. Energy subsidy reform is offered by the imf with financial support from the managing natural resource wealth trust fund mnrw. Is energy subsidy reform in an oilexporting small economy. In an unprecedented step, the iranian government in 2010 in response to years of rising costs to its budget of fuel and electricity subsidies raises fuel and electricity prices by between 300% electricity to % diesel, in a single step. First, to accompany subsidy reforms the previous president had put in place an effective system of direct cash transfers to 19 million households. Energy subsidy reform lessons and implications energy subsidies have wideranging economic consequences. It summarizes in nontechnical language the central issues related to energy subsidies and key messages for policy makers looking to reform subsidy programmes.
Abstract this book proposes a simple framework for understanding the political economy of subsidy reform and applies it to four indepth country studies covering more than 30 distinct episodes of reform. Direct federal financial interventions and subsidies in. A brief political economy of energy subsidies in the. Contrary to the subsidy reform plan, the volume of iranian subsidies given to its citizens on fossil fuel, which increased 42.
Implications of energy subsidy reform in india sciencedirect. Lessons and implications executive summary energy subsidies have wideranging economic consequences. These had been in the pipeline for over five years, but repeatedly delayed by political instability. Energy subsidy the energy input per calorie of food produced energy input per calorie of food obtained is greater for modern agricultural practices than for traditional agriculture fossil fuel energy is the primary energy subsidy for largescale modern food production used to produce fertilizers and pesticides, to operate tractors, to pump. Raising ambition through fossil fuel subsidy reform iisd. The views expressed in this material are those of the course staff and do not necessarily represent. The political economy of energy subsidy reform english abstract. Esrf provides technical assistance to governments, develops tools for assessment and decisionmaking, and facilitates knowledgeexchange for a global community of reformers. Supported by the global subsidies initiative gsi and coorganized with the united states and the world bank, this years event was held during the international monetary fund imf and world bank spring meetings on.
Dong energy breaks subsidy link with new offshore wind farms. The findings provide a quantitative compilation of the amounts and types of incentives provided from 1950 to. Energy subsidies that keep domestic energy prices below market prices serve as a strategic tool to promote industrialization and diversification, to protect the income of citizens, and to distribute state benefits to the population. The effective institutions platform is an international partnership of over 60 countries and organisations multilateral and bilateral development agencies, civil society, think tanks which aims to support country needs and expectations in strengthening their public sector institutions. This booklet draws on recent work on energysubsidy reform carried out by the united nations environment programme unep and the international energy agency iea. The most recent domestic energy subsidy reform experience of iran is in this context worth noting. Lessons and implications benedict clements, david coady, stefania fabrizio, sanjeev gupta, trevor alleyne, carlo sdralevich on. A guide to the political economy of reforming energy subsidies iza. This book proposes a simple framework for understanding the political economy of subsidy reform andapplies it to four indepth country studies covering more than 30 distinct episodes of reform. Second, subsidy reform strategies vary because the underlying political economy problems vary.