Lessons Drawn from Reforms of Energy Subsidies

These large For the purpose of this document, places these subsidies – on the supply fuel subsidies for private and business energy subsidies can be defined as side or on the demand side.4 transport eliminate incentives to be any government action that lowers economical.7 the cost of energy production, raises Reform of how price controls are the revenues of energy producers used to promote efficie. [...] Despite interest in reform, the (where the subsidies are for oil and For example, a 2007 report found International Energy Agency (IEA) gas).3 Critics note that the use of public that fuel efficiency of private and found that distortions continue to exist money creates artificial prices and public transport in the Middle East is in today’s energy markets. [...] In 2008, gasoline prices by one-third, partially Arab Emirates the government decided to remove reinstituting the subsidy.43 most energy subsidies, resulting in On behalf of the Members of the Global even more price increases. [...] However, Properly communicating the costs of Agenda Council on Energy Security: to ensure that domestic prices align the subsidy and the benefits of the with those in international markets, the subsidy’s removal could have smoothed Vice-Chairs: government set up a committee to set the situation. [...] price-setting mechanisms and Citizens feared that this abrupt end to education of decision-makers and fossil fuel subsidies was a ploy by the the public about the problems with government to capture the country’s government intervention in fuel resources and reacted violently through pricing.45 mass protests.