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Have Model, Will Reform? Assessing the Outcome of Electricity Reforms in Non-OECD Asia

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Abstract:
Non-OECD Asian economies comprise about 34% of world primary energy demand, 60% of population and 65% of the world's poor, and will account for more than 60% of the total increase in energy consumption between 2015 and 2040. Energy sector reforms in non-OECD Asia are thus significant for global energy use, sustainability and socio-economic welfare. The region has experienced a slow and difficult reform path and after more than two decades of reform efforts it is time to take stock of their outcomes. Using a novel dataset assembled for this purpose for the period 1990-2013 for 17 non-OECD Asian countries, we apply instrumental variables regression techniques to several electricity sector reform outcome models. We find that the standard reform model has had limited benefits, largely due to sectoral heterogeneity and institutional endowments. We also show empirical evidence of the theoretical trade-offs between technical efficiency, economic and welfare objectives of reforms. The results call for rethinking of the effectiveness of reforms and awareness of the effects of key reform steps on different outcomes. This is useful for balancing the trade-offs among competing reform objectives.

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Energy Specializations: Energy Security and Geopolitics – Regional Analysis (Asia); Electricity – Policy and Regulation; Energy Modeling – Sectoral Energy Demand & Technology; Energy Access – Sustainable Development and Distributed Energy

JEL Codes: Q41: Energy: Demand and Supply; Prices, Q42: Alternative Energy Sources, C51: Model Construction and Estimation, D62: Externalities, D61: Allocative Efficiency; Cost-Benefit Analysis

Keywords: market liberalisation, electricity restructuring, development, welfare

DOI: 10.5547/01956574.39.4.asen

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Published in Volume 39, Number 4 of the bi-monthly journal of the IAEE's Energy Economics Education Foundation.

 

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