DISTRIBUTIONAL IMPACTS OF ENERGY SUBSIDY REFORM IN INDONESIA - Green Growth and Sustainable Development Forum

DISTRIBUTIONAL IMPACTS OF ENERGY SUBSIDY REFORM IN INDONESIA DISTRIBUTIONAL IMPACTS OF ENERGY SUBSIDY REFORM IN INDONESIA Green Growth and Sustainable Development Forum 13-14 November 2014, Paris Shardul Agrawala Head, Environment and Economy Integration Division Environment Directorate Fossil fuel subsidies (FFS) FFS in the world • USD 544 billion/year energy consumption subsidies (primarily in e. [...] (2012) • Distributional: World Bank (2006, 2011), Dartanto (2013) Goal: Construction of a dedicated framework to deal simultaneously with all 3 dimensions energy subsidy reforms • Environmental • Macroeconomic • Distributional 4 Analytical framework Environmental Policy Economy -wide effects Household-level effects • Market prices • Income • Wages and rents • Expenditures • Taxes and transfers • D. [...] forthcoming 8 Results (3/4): Distributional impact 14 12 Real income variation in 2020 (% baseline) 10 Cash transfers 8 Labour tax 6 Food subsidies 4 2 0 -2 1 11 21 31 41 51 61 71 81 91 Source: ENV-Linkages Income centile groups Durand-Lasserve et al. [...] forthcoming 9 Results (4/4): drivers of distributional impact in the cash transfer scenario 15 13 Total effect 11 9 Final price effect 7 Transfer effect 5 3 1 -1 -3 -5 1 11 21 31 41 51 61 71 8 Source: ENV-Linkages income 1 centi9le1 groups Durand-Lasserve et al. [...] • Redistribution through development in infrastructure could also have a very high social rate of return, but need for further model development investigated in the future 11 THANK YOU For further information: www.oecd.org/environment/modelling DISTRIBUTIONAL IMPACTS OF ENERGY SUBSIDY REFORM IN INDONESIA Fossil fuel subsidies (FFS) FFS reform in Indonesia.