Each year, governments around the world collectively spend billions of dollars subsidizing the production and consumption of electricity, fossil fuels, or district heating. These subsidies cause economywide distortions and encourage excessive and inefficient consumption of energy. In both developing countries and advanced economies, governments often subsidize energy sources and carriers, ranging from petroleum products such as gasoline, diesel, liquefied gas or kerosene, to electricity or district heating. This practice diverts funding from more pressing priorities such as healthcare, education, the fight against hunger, or supporting renewable energy. Energy subsidies often are intended to lower energy costs for the poor, but the broad application of price subsidies ends up disproportionately benefiting richer households who consume more energy. While the case for reforming energy subsidies is clear, implementing such reforms is politically and technically challenging. These reforms require substantial efforts to develop, and success is hard to define, achieve, and maintain. Building on ESMAP’s Energy Subsidy Reform Assessment Framework (ESRAF) and drawing on recent research plus a decade of experience with country-specific technical assistance, the report consolidates those findings and presents energy subsidy reform practitioners with a series of steps that can be considered while supporting subsidy reform efforts. The steps include gaining a solid understanding of the background, effects, and socio-economic motivations for energy subsidies. The steps suggest developing several reform options, obtaining a clear understanding of the reforms’ effects on stakeholders, and building mitigation measures and benefits for society and the economy into reform design. They also advise to be strategic about timing and sequencing of reform and to communicate meaningfully and clearly with the public about the reforms. The report was preceded by a series of technical background reports covering a range of topics including macroeconomic modeling, distributional analysis, social protection, and political economy.
Authors
- Citation
- “ Gencer, Defne ; Arizu, Beatriz . 2024 . From Ambition to Action: Practical Insights on Energy Subsidy Reforms . Energy Subsidy Reform in Action Series. ESMAP Report . © Washington, DC: World Bank . http://hdl.handle.net/10986/42275 License: CC BY 3.0 IGO . ”
- Collection(s)
- ESMAP papers
- DOI
- https://doi.org/10.1596/42275
- Identifier externaldocumentum
- 34408991
- Identifier internaldocumentum
- 34408991
- Pages
- 126
- Published in
- United States of America
- RelationisPartofseries
- Energy Subsidy Reform in Action Series. ESMAP Report
- Report
- 194236
- Rights
- CC BY 3.0 IGO
- Rights Holder
- World Bank
- Rights URI
- https://creativecommons.org/licenses/by/3.0/igo/
- UNIT
- Infrastructure - ESMAP 2 (IEES2)
- URI
- https://hdl.handle.net/10986/42275
- date disclosure
- 2024-10-22
- region geographical
- World
- theme
- Social Safety Nets,Mitigation,Energy,Gender,Human Development and Gender,Social Protection,Social Development and Protection,Energy Policies & Reform,Environment and Natural Resource Management,Climate change,Adaptation,Energy Efficiency
Files
Table of Contents
- Abbreviations 8
- Foreword 9
- References 120
- Appendix B. Innovation at the Energy-Agriculture-Water Nexus in Punjab, India 118
- Appendix A. Overview of World Bank Support to Energy Subsidy Reforms as Part of Development Policy Financing 115
- Areas for Future Analytical and Knowledge Work 111
- Insights into Key Analyses and Technical Assistance 106
- Insights into the Substance of Reforms 101
- The What Next: Strengthening PEA and Communications Support 97
- Conclusions, Takeaways and Future Work Areas 100
- The How: Activity Designs, Findings and Insights 94
- The What: A Review of Recent PEA and Communication Technical Assistance 93
- The Why: Background to the Analysis 93
- The What Next: Areas for Future Work 90
- Technical Assistance for Political Economy Analysis and Communications 92
- The How: Review of Evidence and Insights from Recent Research on Firms 88
- The What: Review of Recent Literature on Energy Price Impacts on Firms 87
- The Why: Background to the Review 87
- The What Next: Key Takeaways from the Stocktaking 83
- Firm-Level Effects of Energy Price Increases 86
- The How: Review of Program Context, Design, and Implementation Approaches 80
- The What: A Global Stocktaking of Cash Transfers and Subsidy Reform 79
- The Why: Background to the Analysis 79
- The What Next: Takeaways from the Review of Practical Applications 76
- Cash Transfers in the Context of Energy Subsidy Reforms 78
- The How: Review of Main Approaches and Practical Applications 72
- The What: Understanding the Distributional Impact of Energy Subsidies 71
- The What Next: Takeaways from the Application of TCP 67
- Distributional Analysis for Energy Subsidy Reforms 70
- The How: Illustrative Calculations of TCP Using Best-Available Data Sets 66
- The What: Assessing Direct and Indirect Carbon Pricing Signals 65
- The Why: Background to the Analysis 65
- The What Next: Key Takeaways and Areas for Future Work 63
- Total Carbon Pricing for Energy Consumption 64
- The How: Observations on Model Designs, Findings, and Contribution to Reforms 61
- The What: Review of Macromodeling Approaches 60
- The Why: Background to the Analysis 59
- The What Next: Key Takeaways and Areas for Future Work 56
- Macroeconomic Modeling for Energy Subsidy Reforms 58
- The How: Review of Approaches to Subsidizing Bottled Gas 54
- The What: Understanding Approaches to Subsidizing Bottled Gas 53
- The Why: Background to the Analysis 53
- The What Next: Considerations for Sector-Specific Analyses 49
- Subsidizing Bottled Gas: Approaches and Effects on Household Use 52
- The How: Deep Dive into Approaches Under Energy Sector Analyses 45
- The What: Stocktaking of ESRF-Funded Activities in the Energy Sector 43
- The Why: Background to the Review 43
- What Next: Key Takeaways and Areas for Future Work 40
- Analytical Foundations for Reforms: Core Energy Sector Analyses 42
- The How: Review of Main Findings and Evidence From Recent Research 38
- The What: Review of Emerging Approaches and Analyses in Energy Subsidy Reform 37
- The Why: Background to the Review 37
- Report Structure 32
- Energy Subsidy Reform: Emerging Approaches and Insights from Recent Research 36
- About This Report: Objectives, Scope, and Approach 31
- Supporting Developing Countries in their Reform Efforts 28
- The Why: Background to the Analysis 71
