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Hauke Ward - One of the best experts on this subject based on the ideXlab platform.
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can government transfers make Energy Subsidy reform socially acceptable a case study on ecuador
Energy Policy, 2019Co-Authors: Filip Schaffitzel, Michael Jakob, Rafael Soria, Adrien Vogtschilb, Hauke WardAbstract:Abstract Energy subsidies cost Ecuador 7% of its public budget, or two thirds of the fiscal deficit. Removing these subsidies would yield local economic and environmental benefits and help implement climate targets set in the Paris Agreement. However, adverse effects on vulnerable households can make Subsidy reforms politically difficult. To inform policy design, we assess the distributional impacts of Energy Subsidy reform using Ecuadorian household data and an augmented input-output table. We find that Subsidy removal without compensation would be regressive for diesel and LPG, progressive for gasoline, and approximately neutral for electricity. We then analyze how freed up public revenues could fund in-kind and in-cash compensation schemes to mitigate income losses for poor households. Our results indicate that removing all Energy subsidies and increasing the cash transfer program, Bono de Desarrollo Humano (BDH), by nearly US$ 50 per month would increase the real income of the poorest quintile by 10% while leaving more than US$ 1.3 billion for the public budget. Finally, we conduct interviews with local policy makers and experts to identify two reform options that are progressive and considered feasible: eliminating subsidies on gasoline while increasing the BDH and replacing universal LPG subsidies with targeted LPG vouchers.
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can government transfers make Energy Subsidy reform socially acceptable a case study on ecuador
Research Papers in Economics, 2019Co-Authors: Filip Schaffitzel, Michael Jakob, Rafael Soria, Adrien Vogtschilb, Hauke WardAbstract:Energy subsidies account for about 7% of Ecuador’s yearly public spending, or two thirds of the fiscal deficit. Removing these subsidies would yield clear economic and environmental benefits and help implement climate targets set in the Paris Agreement. However, expected adverse effects on vulnerable households can make reforms politically difficult. To inform policy design, we use household survey data from Ecuador in combination with augmented input-output data to assess the distributional impacts of Energy Subsidy reform. We find that in absolute terms Energy subsidies benefit richer households more than poor ones. Relative to household income, Subsidy removal without compensation would be regressive for diesel and LPG, progressive for gasoline, and approximately neutral for electricity. We then analyze how a fraction of financial resources freed up by Subsidy reform could be used to mitigate income losses for poor households by means of in-kind and in-cash revenue recycling schemes. Our results indicate that removing all Energy subsidies and increasing the existing social protection program, Bono de Desarrollo Humano, by nearly US$ 50 per month would confer net benefits of almost 10% of their current income to the poorest quintile. In addition, more than 1.3 billion US$ would still be available for the public budget after the reform. Finally, we conduct expert interviews to evaluate the political and institutional challenges related to Energy Subsidy reform. We identify two combinations of reform options and recycling schemes that would benefit the poorest 40% of households and are deemed to be feasible: eliminating subsidies on gasoline while increasing the amount transferred to vulnerable households through the Bono de Desarrollo Humano and replacing universal LPG subsidies with targeted LPG vouchers.
Juergen Jung - One of the best experts on this subject based on the ideXlab platform.
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a macroeconomic analysis of Energy subsidies in a small open economy
Economic Inquiry, 2015Co-Authors: Gerhard Glomm, Juergen JungAbstract:We construct a dynamic model of a small open economy to analyze the effects of large Energy subsidies. The model includes domestic Energy production and consumption, trade in Energy at world market prices, as well as private and public sector production. The model is calibrated to Egypt and used to study reforms such as reductions in Energy subsidies with corresponding reductions in various tax instruments or increases in infrastructure investment. We calculate the new steady states, transition paths to the new steady state, and the size of the associated welfare losses or gains. Our main results for a 15% cut in Energy subsidies are: (1) Steady state gross domestic product drops in most of our experiments as less Energy is used in production. (2) Steady state consumption rises in most of our experiments. (3) Welfare can rise by as much as 0.6% in consumption equivalent terms. (4) The largest gains in terms of output and of welfare can be obtained when savings from Energy Subsidy cuts are used to fund additional infrastructure investment. (JEL E21, E63, H55, J26, J45) To understand the effects of subsidies and taxes on an Energy sector and on consumption in a given country requires establishing a complete picture of the market in which it operates and of the various policies--past and present--that have applied to it. (IEA 2010c, 11) 1. INTRODUCTION A report by the International Energy Agency (IEA 2010a) in 2010 identified 37 countries that together account for 95% of global subsidized fossil-fuel consumption and found that total fuel consumption subsidies were about $557 billion in 2008, a stark increase from $342 billion in 2007. Countries with the highest subsidies for Energy turn out to be smaller, oil-producing countries like Iran ($65 billion in subsidies in 2009, 20% of gross domestic product [GDP]), Saudi Arabia, Venezuela, and Egypt (IEA 2010b) The underpricing of Energy can lead to excess consumption of Energy that together with the need to finance these subsidies can have adverse economic effects, both intra- and intertemporally. Energy subsidies may therefore have large adverse effects on capital accumulation, economic growth, and hence welfare, especially for future generations. The IEA estimates that many countries forgo faster growth of up to 2.6% by subsidizing Energy (IEA 2010c). Since 2008 many major oil-subsidizing countries have started to bring their prices in line with world market prices, among them China, Russia, India, and Indonesia. Many of the concerns about the inefficiency of Energy subsidies have focused on environmental aspects and green house gas (GHG) emissions in particular. The IEA (2010c) estimates that a world-wide reduction of fuel subsidies could decrease GHG emissions in the long run by around 10%. There are relatively few studies of the short-term and long-term macroeconomic effects of reductions in Energy subsidies. These effects are complex and require an explicit dynamic modeling approach. There are many interrelated effects: (1) Phasing out Energy subsidies alters the price of Energy relative to other consumption goods and hence not only the quantity demanded for Energy but also the demand for other goods. (2) The degree of complementarity/substitutability between these consumption goods together with the expectations of the time path for the phase out influences savings behavior and thus capital accumulation of households. (3) Changing Energy subsidies influences use of Energy in production. Whether Energy is a complement or a substitute to other factors of production influences total output and marginal products of all factors of production. (4) Changes in factor payments influence household income and thus consumption and savings behavior. (5) Phasing out Energy subsidies allows for other changes in the government budget such as changes in tax rates or other government expenditures, which in turn will influence firm and household behavior. …
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a macroeconomic analysis of Energy subsidies in a small open economy
Research Papers in Economics, 2015Co-Authors: Gerhard Glomm, Juergen JungAbstract:We construct a dynamic model of a small open economy to analyze the effects of large Energy subsidies. The model includes domestic Energy production and consumption, trade in Energy at world market prices, as well as private and public sector production. The model is calibrated to Egypt and used to study reforms such as reductions in Energy subsidies with corresponding reductions in various tax instruments or increases in infrastructure investment. We calculate the new steady states, transition paths to the new steady state and the size of the associated welfare losses or gains. Our main results for a 15 percent cut in Energy subsidies are: (i) Steady state GDP drops in most of our experiments as less Energy is used in production. (ii) Steady state consumption rises in most of our experiments. (iii) Welfare can rise by as much as 0.6 percent in consumption equivalent terms. (iv) The largest gains in terms of output and of welfare can be obtained when savings from Energy Subsidy cuts are used to fund additional infrastructure investment.
Saeed Solaymani - One of the best experts on this subject based on the ideXlab platform.
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effectiveness of Energy efficiency improvements in the context of Energy Subsidy policies
Clean Technologies and Environmental Policy, 2021Co-Authors: Saeed SolaymaniAbstract:Malaysia, as one of the top Energy subsidizing countries, has announced to remove Energy subsidies necessarily, not only to reduce Energy consumption and the government budget deficit but also to improve overall efficiency and air quality. Therefore, this study evaluates the impacts of rationalizing Energy Subsidy and its Energy efficiency improvement during 2010–2030 using a dynamic recursive computable general equilibrium model. Results revealed that reducing Energy subsidies decreases Energy consumption and emissions of all air pollutants. While the economic performance of the country improves in the long run due to stimulation in capital demand and investment, it reduces in the short run. Energy efficiency also improves by 1.1% and 2.3%, in the short run, in response to a reduction of 10% and 100% in Energy subsidies, respectively. Energy efficiency improvements decrease the negative effects of pure Subsidy policies on real GDP, trade, investment, and household consumption. The efficiency improvement policies also are effective in reducing more level of the rebound effect and lead to more Energy saving in the economy, particularly in the petroleum products sector. The impacts on the rebound effect also differ across economic sectors. The results of this study provide new insights for Energy Subsidy policy and Energy efficiency and suggest that additional tools and policies are required for improving the Energy efficiency caused by phasing out Energy subsidies. Malaysia, as one of the top Energy subsidized countries, attempts to reduce the level of Energy subsidies over time and, consequently, decline the use of fossil fuels in the economy. Therefore, this study analyzes the impacts of different Subsidy reform policy on Energy efficiency and, consequently, on economic and environmental performance and rebound effect of Malaysia by a recursive dynamic computable general equilibrium model.
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impacts of Energy Subsidy reform on poverty and income inequality in malaysia
Quality & Quantity, 2016Co-Authors: Saeed SolaymaniAbstract:Malaysia pays a great share of its gross domestic product on Energy subsidies. Payment of subsidies causes some failures in the economy, such as disrupting the price mechanism and destroying allocation of resources in the economy. Removing these subsidies has important implication for sustainable development through their effects on Energy consumption, price system, resource allocation and emission. This study employs a computable general equilibrium model, which is a more comprehensive method than statistical and econometric methods, to identify the long-run impacts of Energy Subsidy reform in the Malaysian economy, especially on poverty and income inequality across four Malaysian ethnic groups, namely Malay, Chinese, Indian, Other in both rural and urban areas, and one noncitizen household. The results of this study indicate that urban households are set to lose most from Energy Subsidy reform compared to rural and noncitizen households due to increased expenditure. In addition, Malay households, particularly in urban areas, lose more significantly than other household groups. This policy leads to initial increases in the overall inequality in the economy, but the increase in inequality in urban areas is greater than rural areas.
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economic and environmental impacts of Energy Subsidy reform and oil price shock on the malaysian transport sector
Travel behaviour and society, 2015Co-Authors: Saeed Solaymani, Roozbeh Kardooni, Fatimah Kari, Sumiani YusoffAbstract:This study employs a multi-sector computable general equilibrium model to investigate the long-run impacts of three scenarios, namely high prices of petroleum products, Energy Subsidy reform and the combine of both, on the Malaysian transport sector. The long-run simulation results suggest that all shocks are beneficial for the entire economy because of the increase in real GDP and investment. The shocks encourage the reallocation of resources and therefore induce disparities in sectoral adjustments. All transport sectors, except water transport, gain from high petroleum prices due to the increase in their domestic output, domestic sales and exports, while they lose from the Energy Subsidy reform and the combined scenario. The shocks lead to significant changes in travel behaviour of all household types through a change in their use of transport sub-sectors. The combined scenario followed by the high petroleum price shock greatly reduces Energy consumption and emissions of all air pollutants in the transport sectors. These findings enhance our understanding of the transport impact of oil price shocks and Energy Subsidy reform and should be of much interest to scholars, corporate executives, travel agencies, regulators, and policy makers.
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impacts of Energy Subsidy reform on the malaysian economy and transportation sector
Energy Policy, 2014Co-Authors: Saeed Solaymani, Fatimah KariAbstract:Malaysia is paying a high level of subsidies on the consumption of Energy (about 5% of its GDP). Therefore, reforming the Energy subsidies, as planned by the government, will have a significant impact on household welfare and Energy-intensive sectors, such as the transport sector. This study employs a computable general equilibrium (CGE) model to highlight the transmission channels through which the removal of Energy subsidies affects the domestic economy. The findings show that the shock increases real GDP and real investment, while decreasing Malaysian total exports and imports. The removal of Energy subsidies also decreases the aggregate Energy demand, and, consequently, decreases the level of carbon emissions in the Malaysian economy. In addition, households experience significant falls in their consumption and welfare. The transport sector is significantly influenced through an increase in production costs due to an increase in the prices of intermediate inputs. The total output and total exports of the whole transport sector decrease while its imports increase. In addition, the use of all kinds of transport by households decreases significantly. The Malaysian Energy Subsidy reform, leads to an initial decrease in CO2 emissions and demand for electricity, gas, and petroleum products in the entire transport sector.
Chen Luo - One of the best experts on this subject based on the ideXlab platform.
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overall review of renewable Energy Subsidy policies in china contradictions of intentions and effects
Renewable & Sustainable Energy Reviews, 2015Co-Authors: Jianfei Shen, Chen LuoAbstract:Abstract China is vast, abundant and particularly plentiful in Energy sources, due to which it has obtained remarkable achievements on economy. However, its Energy structure is too simple to support the sustainable development of economy as coal still contributes to the majority of Energy consumption in China. As a consequence, Renewable Energy Law was enacted in 2005, and Chinese government announced a series of policies to boom renewable Energy industry. Subsidy policy is one of the major forms of these policies. This paper aims to present these Subsidy policies and to analyze their effects according to relative data in Energy industry 2005–2013, to find out the deficiencies and enlighten possible policy improvements. The original intentions and abstracts of 5 different levels of Subsidy related policies are summarized, and the effects in reality are attentively analyzed. It can be concluded that Subsidy policies have different short-term effect on different renewable energies, and they all show some negative effect to a certain extent. 6 core problems are summarized in this paper, and remedy strategies are suggested.
Gerhard Glomm - One of the best experts on this subject based on the ideXlab platform.
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a macroeconomic analysis of Energy subsidies in a small open economy
Economic Inquiry, 2015Co-Authors: Gerhard Glomm, Juergen JungAbstract:We construct a dynamic model of a small open economy to analyze the effects of large Energy subsidies. The model includes domestic Energy production and consumption, trade in Energy at world market prices, as well as private and public sector production. The model is calibrated to Egypt and used to study reforms such as reductions in Energy subsidies with corresponding reductions in various tax instruments or increases in infrastructure investment. We calculate the new steady states, transition paths to the new steady state, and the size of the associated welfare losses or gains. Our main results for a 15% cut in Energy subsidies are: (1) Steady state gross domestic product drops in most of our experiments as less Energy is used in production. (2) Steady state consumption rises in most of our experiments. (3) Welfare can rise by as much as 0.6% in consumption equivalent terms. (4) The largest gains in terms of output and of welfare can be obtained when savings from Energy Subsidy cuts are used to fund additional infrastructure investment. (JEL E21, E63, H55, J26, J45) To understand the effects of subsidies and taxes on an Energy sector and on consumption in a given country requires establishing a complete picture of the market in which it operates and of the various policies--past and present--that have applied to it. (IEA 2010c, 11) 1. INTRODUCTION A report by the International Energy Agency (IEA 2010a) in 2010 identified 37 countries that together account for 95% of global subsidized fossil-fuel consumption and found that total fuel consumption subsidies were about $557 billion in 2008, a stark increase from $342 billion in 2007. Countries with the highest subsidies for Energy turn out to be smaller, oil-producing countries like Iran ($65 billion in subsidies in 2009, 20% of gross domestic product [GDP]), Saudi Arabia, Venezuela, and Egypt (IEA 2010b) The underpricing of Energy can lead to excess consumption of Energy that together with the need to finance these subsidies can have adverse economic effects, both intra- and intertemporally. Energy subsidies may therefore have large adverse effects on capital accumulation, economic growth, and hence welfare, especially for future generations. The IEA estimates that many countries forgo faster growth of up to 2.6% by subsidizing Energy (IEA 2010c). Since 2008 many major oil-subsidizing countries have started to bring their prices in line with world market prices, among them China, Russia, India, and Indonesia. Many of the concerns about the inefficiency of Energy subsidies have focused on environmental aspects and green house gas (GHG) emissions in particular. The IEA (2010c) estimates that a world-wide reduction of fuel subsidies could decrease GHG emissions in the long run by around 10%. There are relatively few studies of the short-term and long-term macroeconomic effects of reductions in Energy subsidies. These effects are complex and require an explicit dynamic modeling approach. There are many interrelated effects: (1) Phasing out Energy subsidies alters the price of Energy relative to other consumption goods and hence not only the quantity demanded for Energy but also the demand for other goods. (2) The degree of complementarity/substitutability between these consumption goods together with the expectations of the time path for the phase out influences savings behavior and thus capital accumulation of households. (3) Changing Energy subsidies influences use of Energy in production. Whether Energy is a complement or a substitute to other factors of production influences total output and marginal products of all factors of production. (4) Changes in factor payments influence household income and thus consumption and savings behavior. (5) Phasing out Energy subsidies allows for other changes in the government budget such as changes in tax rates or other government expenditures, which in turn will influence firm and household behavior. …
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a macroeconomic analysis of Energy subsidies in a small open economy
Research Papers in Economics, 2015Co-Authors: Gerhard Glomm, Juergen JungAbstract:We construct a dynamic model of a small open economy to analyze the effects of large Energy subsidies. The model includes domestic Energy production and consumption, trade in Energy at world market prices, as well as private and public sector production. The model is calibrated to Egypt and used to study reforms such as reductions in Energy subsidies with corresponding reductions in various tax instruments or increases in infrastructure investment. We calculate the new steady states, transition paths to the new steady state and the size of the associated welfare losses or gains. Our main results for a 15 percent cut in Energy subsidies are: (i) Steady state GDP drops in most of our experiments as less Energy is used in production. (ii) Steady state consumption rises in most of our experiments. (iii) Welfare can rise by as much as 0.6 percent in consumption equivalent terms. (iv) The largest gains in terms of output and of welfare can be obtained when savings from Energy Subsidy cuts are used to fund additional infrastructure investment.