MF Policy Paper · 2013 · 262 citations · 23 references
Public AffairsEconomicsPublic PolicyEnergy EconomicsEnergy PolicyPublic EconomicsEnergy IncentivesEnergy Policy AnalysisEnergy PoliticsEnergy SecurityEnergy SubsidiesRenewable EnergyEnergy ConsumptionEnergy Subsidy PolicyPrivate Investment IncentivesRenewable Energy FinancingRenewable Energy IncentivesSubsidy PolicySubsidy StructureUniversal Subsidies
Energy subsidies have wide‑ranging economic consequences. The paper aims to deliver the most comprehensive estimates of energy subsidies for 176 countries and to analyze how to reform them. This is achieved by compiling subsidy estimates and examining 22 country case studies conducted by IMF staff and other institutions. Subsidies worsen fiscal balances, crowd out public spending, depress private investment, distort resource allocation, encourage excessive consumption, favor high‑income households, and accelerate global warming.
Energy subsidies have wide-ranging economic consequences. While aimed at protecting consumers, subsidies aggravate fiscal imbalances, crowd-out priority public spending, and depress private investment, including in the energy sector. Subsidies also distort resource allocation by encouraging excessive energy consumption, artificially promoting capital-intensive industries, reducing incentives for investment in renewable energy, and accelerating the depletion of natural resources. Most subsidy benefits are captured by higher-income households, reinforcing inequality. Even future generations are affected through the damaging effects of increased energy consumption on global warming. This paper provides: (i) the most comprehensive estimates of energy subsidies currently available for 176 countries; and (ii) an analysis of ?how to do energy subsidy reform, drawing on insights from 22 country case studies undertaken by IMF staff and analyses carried out by other institutions.
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