IDEAS home Printed from
   My bibliography  Save this article

Simulation and evaluation of the economic impact of the change of the tariff policy on Ukrainian electricity market


  • M. Chepelev


Among all types of economic activities in Ukraine, power industry is the only one utilizing the mechanism of cross subsidization. Electricity tariffs for the residential consumers are set far beyond the estimated retail level, while industrial consumers have to pay higher prices in order to compensate those costs. In 2012, electricity consumption subsidies exceeded 31 billion UAH, which is over 8, 7% of the central government budget and 2, 3% of Ukraine's GDP. In this study, a static computable general equilibrium model is applied to investigate distributional and poverty-related effects of the price reform in the electricity sector of Ukraine, considering the scenarios of 30%, 50% and 100% subsidies elimination. In addition, different choices of compensating mechanisms for various households' groups are studied, such as direct transfers from the central government budget, partial preservation of cross-subsidization and compensation through increase of taxes on production and imports. The results indicate that essential positive effects from the elimination of subsidies (lower production costs, output gain and revival of investment processes) mostly take place in the industrial activities. Moreover, the highest growth rates are observed for those industries that are not only active electricity consumers, but also produce energy intensive goods and services. Regardless of the nature of the implemented compensation mechanisms, the decrease in cross-subsidization leads to investments growth: for some scenarios, by up to 4.5 billion UAH. At the same time, residential consumers suffer from the regressive effects: poor households lose relatively more than the rich ones. In his context, the indemnity options analyzed in this study prove to be efficient social dampers.

Suggested Citation

  • M. Chepelev, 2014. "Simulation and evaluation of the economic impact of the change of the tariff policy on Ukrainian electricity market," Economy and Forecasting, Valeriy Heyets, issue 1, pages 121-138.
  • Handle: RePEc:eip:journl:y:2014:i:1:p:121-138

    Download full text from publisher

    File URL:
    Download Restriction: no

    More about this item


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eip:journl:y:2014:i:1:p:121-138. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Iryna Bazhal). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.