IMF Working Paper · 2015 · 309 citations · 25 references
EngineeringEnergy Efficiency PolicyEnergy MarketsEnvironmental EconomicsEnergy EconomyEnergy TaxationEnergy TradeEnvironmental TaxationEnergy RegulationEconomicsPublic PolicyEnergy SubsidiesPost-tax Energy SubsidiesGlobal EconomiesEconomic PolicyEnergy Subsidy ReformEnergy TransitionEnergy PolicyBusinessTaxationEnergy Economics
Post‑tax energy subsidies arise when consumer prices fall below supply costs plus environmental and revenue‑raising taxes. The study compiles an up‑to‑date global and regional assessment of energy subsidies. Analysis shows post‑tax subsidies are far larger than earlier estimates, likely to remain high, and reform would yield significant fiscal, environmental, and welfare benefits.
This paper provides a comprehensive, updated picture of energy subsidies at the global and regional levels. It focuses on the broad notion of post-tax energy subsidies, which arise when consumer prices are below supply costs plus a tax to reflect environmental damage and an additional tax applied to all consumption goods to raise government revenues. Post-tax energy subsidies are dramatically higher than previously estimated, and are projected to remain high. These subsidies primarily reflect under-pricing from a domestic (rather than global) perspective, so even unilateral price reform is in countries’ own interests. The potential fiscal, environmental and welfare impacts of energy subsidy reform are substantial.
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