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The Environmental Cost of Global Fuel Subsidies

Lucas W. Davis

Year: 2017
Volume: Volume 38
Number: KAPSARC Special Issue
DOI: 10.5547/01956574.38.SI1.ldav
No Abstract



Pricing Electricity and Supporting Renewables in Heavily Energy Subsidized Economies

David M. Newbery

Year: 2017
Volume: Volume 38
Number: KAPSARC Special Issue
DOI: 10.5547/01956574.38.SI1.dnew
View Abstract

Abstract:
Heavily Energy Subsidized Economies' energy subsidies cost the budget on average 4% of GDP in 2014. Resource rents permit administratively undemanding transfers to citizens to maintain political support, whose removal will be resisted, despite resulting inefficient consumption and lock-in risk. Collapsing energy prices delivering severe fiscal shocks combined with growing concerns over climate change damage make carefully designed reforms both urgent and politically more acceptable. Political logic suggests designing reforms that compensate vocal interest groups. The paper presents evidence on the magnitude and impacts of oil, gas and electricity subsidies, and discusses how the electricity sector can be weaned off subsidies, enabling CCGTs and unsubsidized renewables to reduce carbon emissions.



An Examination of How Energy Efficiency Incentives Are Distributed Across Income Groups

Grant D. Jacobsen

Year: 2019
Volume: Volume 40
Number: Number 6
DOI: 10.5547/01956574.40.6.gjac
View Abstract

Abstract:
Many policies lead to the provision of incentives, such as rebates or tax credits, to consumers for the purchase of products that have high energy efficiency. This paper investigates how these incentives are distributed across income groups for three types of subsidies (manufacturer or retailer rebates, utility rebates, and tax credits) and eight types of equipment. While incentives are always concentrated in higher-income households, there is substantial heterogeneity in the magnitude of the concentration depending on how incentives are structured. Tax credits are the type of subsidy that is most concentrated in higher-income households and utility rebates are the least. Incentives for appliances that are not universally-owned, including dishwashers and clotheswashers, are more concentrated than are incentives for other types of equipment. Differences across income groups in the rates of equipment presence and turnover, willingness to purchase Energy Star models, and rates of homeownership contribute to the concentration. After controlling for these factors, utility rebates are no longer concentrated in higher-income households, but manufacturer / retailer rebates and tax credits remain so.



Electricity Tariff Rebalancing in Emerging Countries: The Efficiency-equity Tradeoff and Its Impact on Photovoltaic Distributed Generation

Pedro I. Hancevic, Hector M. Nuñez, and Juan Rosellón

Year: 2022
Volume: Volume 43
Number: Number 4
DOI: 10.5547/01956574.43.4.phan
View Abstract

Abstract:
Existing tariff schemes often fail to achieve basic economic objectives. They set prices per unit that either exceed or fall short the social marginal cost and produce unfair distributional outcomes. In many cases, electricity rates also contribute to unsustainable fiscal deficits due to the (almost) generalized electricity subsidies. Moreover, inefficient residential tariffs do not favor the adoption of green technologies and the investment in energy efficiency improvements. We argue that the efficient deployment of green technologies, and more generally, the clean energy transition, will require electricity tariff reforms. In this paper, we use household level data and hourly industry data from Mexico to show how more efficient pricing mechanisms (such as a two-part tariff scheme in the context of efficient nodal pricing), combined with well-design environmental regulations (e.g., net-metering schemes) and correctly targeted transfer programs (e.g., means testing mechanisms) can improve economic, social, and environmental outcomes significantly, all at once.



Revisiting Energy Subsidy Calculations: A Focus on Saudi Arabia

Anwar A. Gasim and Walid Matar

Year: 2023
Volume: Volume 44
Number: Number 1
DOI: 10.5547/01956574.44.1.agas
View Abstract

Abstract:
The implicit nature of many energy subsidies has led to disagreements over what defines a ‘subsidy' while making it difficult to estimate their indirect fiscal cost. Most energy subsidies in Saudi Arabia are implicit, leading to forgone government revenue. Using a comprehensive dataset, we estimate energy subsidies in Saudi Arabia for ten fuels and electricity for the 2007–2018 period. We begin by applying the price-gap method, then introduce a formulation that better captures the forgone revenues from maintaining a subsidy, accounting for the domestic demand response to the removal of the subsidy, which in turn frees up exports that can reduce the international market price. Our method shows that the magnitude of Saudi Arabia's implicit energy subsidies may be overestimated. For instance, we find that the crude oil subsidy can fall from $8.6 billion (the price-gap estimate) to as low as $3.3 billion in 2018.





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