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Energy subsidies and costs in urban Ethiopia: The cases of kerosene and electricity

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  • Kebede, Bereket

Abstract

Making energy affordable to the poor is a widely cited reason for subsidies. Whether subsidies achieve this objective is rarely analysed. In this article, the significance of kerosene and electricity subsidies in relation to the purchasing power of Ethiopian urban households is examined. The results indicate that subsidies on kerosene prices and electricity tariffs do not significantly change the overall costs for households. Even poor households on the average have the purchasing power to access unsubsidised kerosene. The overall costs—including fixed costs—of accessing electricity are very high relative to purchasing power even for the well to do urban households if down payments are made. But when costs are spread over the lifespan of fixed components, even the average poor have the purchasing power to access electricity. These results underscore the importance of a mechanism that spreads fixed costs over longer periods of time. Spreading fixed costs over electricity bills and providing credit facilities are two options that can ameliorate the condition.

Suggested Citation

  • Kebede, Bereket, 2006. "Energy subsidies and costs in urban Ethiopia: The cases of kerosene and electricity," Renewable Energy, Elsevier, vol. 31(13), pages 2140-2151.
  • Handle: RePEc:eee:renene:v:31:y:2006:i:13:p:2140-2151
    DOI: 10.1016/j.renene.2005.10.005
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    References listed on IDEAS

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    1. Kebede, Bereket & Bekele, Almaz & Kedir, Elias, 2002. "Can the urban poor afford modern energy? The case of Ethiopia," Energy Policy, Elsevier, vol. 30(11-12), pages 1029-1045, September.
    2. Hosier, R. H. & Kipondya, W., 1993. "Urban household energy use in Tanzania : Prices, substitutes and poverty," Energy Policy, Elsevier, vol. 21(5), pages 454-473, May.
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    Cited by:

    1. Arthur, Maria de Fatima S.R. & Zahran, Sammy & Bucini, Gabriela, 2010. "On the adoption of electricity as a domestic source by Mozambican households," Energy Policy, Elsevier, vol. 38(11), pages 7235-7249, November.
    2. Asress, Mulugeta Biadgo & Simonovic, Aleksandar & Komarov, Dragan & Stupar, Slobodan, 2013. "Wind energy resource development in Ethiopia as an alternative energy future beyond the dominant hydropower," Renewable and Sustainable Energy Reviews, Elsevier, vol. 23(C), pages 366-378.
    3. Lin, Boqiang & Jiang, Zhujun, 2011. "Estimates of energy subsidies in China and impact of energy subsidy reform," Energy Economics, Elsevier, vol. 33(2), pages 273-283, March.
    4. Jiang, Zhujun & Ouyang, Xiaoling & Huang, Guangxiao, 2015. "The distributional impacts of removing energy subsidies in China," China Economic Review, Elsevier, vol. 33(C), pages 111-122.
    5. UNDP Regional Bureau for Africa & Bruno Martorano & Giovanni Andrea Cornia, "undated". "Inequality and Growth in an Agricultural-led Development Model: The case of Ethiopia over 1995-2011," UNDP Africa Policy Notes 2017-14, United Nations Development Programme, Regional Bureau for Africa.
    6. Arthur, Maria de Fátima S.R. & Bond, Craig A. & Willson, Bryan, 2012. "Estimation of elasticities for domestic energy demand in Mozambique," Energy Economics, Elsevier, vol. 34(2), pages 398-409.
    7. Cornia, Giovanni Andrea & Martorano, Bruno, 2017. "Income Inequality Trends in sub-Saharan Africa: Divergence, determinants and consequences: Inequality and Growth in an Agricultural-led Development Model: The case of Ethiopia over 1995-2011," UNDP Africa Reports 267649, United Nations Development Programme (UNDP).
    8. Iuliia Ogarenko & Klaus Hubacek, 2013. "Eliminating Indirect Energy Subsidies in Ukraine: Estimation of Environmental and Socioeconomic Effects Using Input–Output Modeling," Journal of Economic Structures, Springer;Pan-Pacific Association of Input-Output Studies (PAPAIOS), vol. 2(1), pages 1-27, December.
    9. repec:eee:accoun:v:53:y:2018:i:4:p:255-273 is not listed on IDEAS
    10. Liu, Wei & Li, Hong, 2011. "Improving energy consumption structure: A comprehensive assessment of fossil energy subsidies reform in China," Energy Policy, Elsevier, vol. 39(7), pages 4134-4143, July.
    11. repec:rac:ecchap:2017-14 is not listed on IDEAS

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