IDEAS home Printed from
   My bibliography  Save this article

Eliminating Indirect Energy Subsidies in Ukraine: Estimation of Environmental and Socioeconomic Effects Using Input–Output Modeling


  • Iuliia Ogarenko
  • Klaus Hubacek


Energy subsidies are causing adverse effects on the economy and environment stimulating inefficient resource allocation and excessive energy consumption. Therefore, multiple positive effects are likely to be obtained if subsidies are reduced or removed completely. This study estimates indirect end-user energy subsidies in gas and electricity sectors of Ukraine and assesses short-term environmental and socioeconomic effects of a hypothetical elimination of these subsidies. Consumer subsidies are quantified utilizing the price-gap approach that compares end-user prices and reference prices that would predominate in competitive markets where no subsidies are provided. Input–output analysis is undertaken to investigate impacts in the short-term. First, a price model is utilized to estimate price changes resulting from subsidy elimination and then a demand-driven IO model is adopted for estimation of associated changes of environmental and social variables. As a result of elimination of energy subsidies, total energy consumption and GHG emissions would decline by about 2.5 % and 3.6 %, respectively. In addition, distributional effects of a subsidy reform are analyzed utilizing data on consumption patterns of different income groups. JEL Classification: D57, P22, P28, Q41. Copyright I. Ogarenko, K. Hubacek; licensee Springer 2013

Suggested Citation

  • 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.
  • Handle: RePEc:spr:jecstr:v:2:y:2013:i:1:p:1-27:10.1186/2193-2409-2-7
    DOI: 10.1186/2193-2409-2-7

    Download full text from publisher

    File URL:
    Download Restriction: Access to full text is restricted to subscribers.

    File URL:
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    1. Julian A. Lampietti & Anke S. Meyer, 2002. "Coping with the Cold : Heating Strategies for Eastern Europe and Central Asia's Urban Poor," World Bank Publications - Books, The World Bank Group, number 15174, December.
    2. 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.
    3. Ramon L. Clarete & James A. Roumasset, 1986. "CGE Models and Development Policy Analysis: Problems, Pitfalls, and Challenges," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 68(5), pages 1212-1216.
    4. Jean-Marc Burniaux & Jean Château & Rob Dellink & Romain Duval & Stéphanie Jamet, 2009. "The Economics of Climate Change Mitigation: How to Build the Necessary Global Action in a Cost-Effective Manner," OECD Economics Department Working Papers 701, OECD Publishing.
    5. Dodonov, Boris & Opitz, Petra & Pfaffenberger, Wolfgang, 2004. "How much do electricity tariff increases in Ukraine hurt the poor?," Energy Policy, Elsevier, vol. 32(7), pages 855-863, May.
    6. Fankhauser, Samuel & Tepic, Sladjana, 2007. "Can poor consumers pay for energy and water? An affordability analysis for transition countries," Energy Policy, Elsevier, vol. 35(2), pages 1038-1049, February.
    7. Saboohi, Y., 2001. "An evaluation of the impact of reducing energy subsidies on living expenses of households," Energy Policy, Elsevier, vol. 29(3), pages 245-252, February.
    8. Mr. Aleh Tsyvinski & Mr. Martin Petri & Mr. Günther Taube, 2002. "Energy Sector Quasi-Fiscal Activities in the Countries of the Former Soviet Union," IMF Working Papers 2002/060, International Monetary Fund.
    9. Scrieciu, S. Serban, 2007. "The inherent dangers of using computable general equilibrium models as a single integrated modelling framework for sustainability impact assessment. A critical note on Bohringer and Loschel (2006)," Ecological Economics, Elsevier, vol. 60(4), pages 678-684, February.
    10. Choi, Jun-Ki & Bakshi, Bhavik R. & Haab, Timothy, 2010. "Effects of a carbon price in the U.S. on economic sectors, resource use, and emissions: An input-output approach," Energy Policy, Elsevier, vol. 38(7), pages 3527-3536, July.
    11. Kerkhof, Annemarie C. & Moll, Henri C. & Drissen, Eric & Wilting, Harry C., 2008. "Taxation of multiple greenhouse gases and the effects on income distribution: A case study of the Netherlands," Ecological Economics, Elsevier, vol. 67(2), pages 318-326, September.
    12. International Monetary Fund, 2007. "Ukraine: Selected Issues," IMF Staff Country Reports 2007/047, International Monetary Fund.
    13. Fankhauser, Samuel & Rodionova, Yulia & Falcetti, Elisabetta, 2008. "Utility payments in Ukraine: Affordability, subsidies and arrears," Energy Policy, Elsevier, vol. 36(11), pages 4168-4177, November.
    14. Nahata, Babu & Izyumov, Alexei & Busygin, Vladimir & Mishura, Anna, 2007. "Application of Ramsey model in transition economy: A Russian case study," Energy Economics, Elsevier, vol. 29(1), pages 105-125, January.
    15. Prosser, Richard D., 1985. "Demand elasticities in OECD : Dynamical aspects," Energy Economics, Elsevier, vol. 7(1), pages 9-12, January.
    16. 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.
    17. Lardic, Sandrine & Mignon, Valerie, 2006. "The impact of oil prices on GDP in European countries: An empirical investigation based on asymmetric cointegration," Energy Policy, Elsevier, vol. 34(18), pages 3910-3915, December.
    18. Atakhanova, Zauresh & Howie, Peter, 2007. "Electricity demand in Kazakhstan," Energy Policy, Elsevier, vol. 35(7), pages 3729-3743, July.
    19. Victor Ginsburgh & Michiel Keyzer, 2002. "The Structure of Applied General Equilibrium Models," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262571579, December.
    20. Russo, Carlo & Green, Richard D. & Howitt, Richard E., 2008. "Estimation Of Supply And Demand Elasticities Of California Commodities," Working Papers 37629, University of California, Davis, Department of Agricultural and Resource Economics.
    21. -, 2009. "The economics of climate change," Sede Subregional de la CEPAL para el Caribe (Estudios e Investigaciones) 38679, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    22. Bohi, Douglas R., 1991. "On the macroeconomic effects of energy price shocks," Resources and Energy, Elsevier, vol. 13(2), pages 145-162, June.
    23. Wohlgemuth, Norbert, 1997. "World transport energy demand modelling : Methodology and elasticities," Energy Policy, Elsevier, vol. 25(14-15), pages 1109-1119, December.
    24. Bentzen, Jan & Engsted, Tom, 1993. "Short- and long-run elasticities in energy demand : A cointegration approach," Energy Economics, Elsevier, vol. 15(1), pages 9-16, January.
    25. Nasseh, Ali Reza & Elyasiani, Elyas, 1984. "Energy price shocks in the 1970s : Impact on industrialized economies," Energy Economics, Elsevier, vol. 6(4), pages 231-244, October.
    26. Gangopadhyay, Shubhashis & Ramaswami, Bharat & Wadhwa, Wilima, 2005. "Reducing subsidies on household fuels in India: how will it affect the poor?," Energy Policy, Elsevier, vol. 33(18), pages 2326-2336, December.
    27. Julian A. Lampietti & Anthony A. Kolb & Sumila Gulyani & Vahram Avenesyan, 2001. "Utility Pricing and the Poor : Lessons from Armenia," World Bank Publications - Books, The World Bank Group, number 13913, December.
    28. Cohn, Steve M., 1980. "Fuel choice and aggregate energy demand in the residential and commercial sectors," Energy, Elsevier, vol. 5(12), pages 1203-1212.
    Full references (including those not matched with items on IDEAS)


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Feng, Kuishuang & Hubacek, Klaus & Liu, Yu & Marchán, Estefanía & Vogt-Schilb, Adrien, 2018. "Managing the distributional effects of energy taxes and subsidy removal in Latin America and the Caribbean," Applied Energy, Elsevier, vol. 225(C), pages 424-436.
    2. Schaffitzel, Filip & Jakob, Michael & Soria, Rafael & Vogt-Schilb, Adrien & Ward, Hauke, 2020. "Can government transfers make energy subsidy reform socially acceptable? A case study on Ecuador," Energy Policy, Elsevier, vol. 137(C).
    3. Timilsina, Govinda R. & Hochman, Gal & Fedets, Iryna, 2016. "Understanding energy efficiency barriers in Ukraine: Insights from a survey of commercial and industrial firms," Energy, Elsevier, vol. 106(C), pages 203-211.
    4. Ke Wang & Jiayu Wang & Klaus Hubacek & Zhifu Mi & Yi‐Ming Wei, 2020. "A cost–benefit analysis of the environmental taxation policy in China: A frontier analysis‐based environmentally extended input–output optimization method," Journal of Industrial Ecology, Yale University, vol. 24(3), pages 564-576, June.
    5. Zhang, Shuo & Yu, Yadong & Kharrazi, Ali & Ren, Hongtao & Ma, Tieju, 2022. "How can structural change contribute to concurrent sustainability policy targets on GDP, emissions, energy, and employment in China?," Energy, Elsevier, vol. 256(C).
    6. Li, Zhi & Zhao, Qing & Guo, Hong & Huang, Ruting, 2024. "Impact of fossil fuel subsidies on energy-saving technological change in China," Energy, Elsevier, vol. 286(C).
    7. Carmen Ramos Carvajal & Ana Salomé García-Muñiz & Blanca Moreno Cuartas, 2019. "Assessing Socioeconomic Impacts of Integrating Distributed Energy Resources in Electricity Markets through Input-Output Models," Energies, MDPI, vol. 12(23), pages 1-21, November.
    8. Saelim, Supawan, 2019. "Carbon tax incidence on household consumption: Heterogeneity across socio-economic factors in Thailand," Economic Analysis and Policy, Elsevier, vol. 62(C), pages 159-174.
    9. Daneshzand, Farzaneh & Asali, Mehdi & Al-Sobhi, Saad A. & Diabat, Ali & Elkamel, Ali, 2022. "A simulation-based optimization scheme for phase-out of natural gas subsidies considering welfare and economic measures," Energy, Elsevier, vol. 259(C).
    10. Fahman Fathurrahman & Bora Kat & Uğur Soytaṣ, 2017. "Simulating Indonesian fuel subsidy reform: a social accounting matrix analysis," Annals of Operations Research, Springer, vol. 255(1), pages 591-615, August.
    11. Kun Peng & Kuishuang Feng & Bin Chen & Yuli Shan & Ning Zhang & Peng Wang & Kai Fang & Yanchao Bai & Xiaowei Zou & Wendong Wei & Xinyi Geng & Yiyi Zhang & Jiashuo Li, 2023. "The global power sector’s low-carbon transition may enhance sustainable development goal achievement," Nature Communications, Nature, vol. 14(1), pages 1-14, December.
    12. Hochman, Gal & Timilsina, Govinda R., 2017. "Energy efficiency barriers in commercial and industrial firms in Ukraine: An empirical analysis," Energy Economics, Elsevier, vol. 63(C), pages 22-30.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Acharya, Rajesh H. & Sadath, Anver C., 2017. "Implications of energy subsidy reform in India," Energy Policy, Elsevier, vol. 102(C), pages 453-462.
    2. Ilyas, Rubina & Hussain, Khadim & Ullah, Mehreen Zaid & Xue, Jianhong, 2022. "Distributional impact of phasing out residential electricity subsidies on household welfare," Energy Policy, Elsevier, vol. 163(C).
    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. Wesseh, Presley K. & Lin, Boqiang & Atsagli, Philip, 2016. "Environmental and welfare assessment of fossil-fuels subsidies removal: A computable general equilibrium analysis for Ghana," Energy, Elsevier, vol. 116(P1), pages 1172-1179.
    6. Jiang, Zhujun & Tan, Jijun, 2013. "How the removal of energy subsidy affects general price in China: A study based on input–output model," Energy Policy, Elsevier, vol. 63(C), pages 599-606.
    7. Fankhauser, Samuel & Rodionova, Yulia & Falcetti, Elisabetta, 2008. "Utility payments in Ukraine: Affordability, subsidies and arrears," Energy Policy, Elsevier, vol. 36(11), pages 4168-4177, November.
    8. International Monetary Fund, 2010. "Islamic Republic of Iran: Selected Issues Paper," IMF Staff Country Reports 2010/076, International Monetary Fund.
    9. Nusair, Salah A., 2019. "Oil price and inflation dynamics in the Gulf Cooperation Council countries," Energy, Elsevier, vol. 181(C), pages 997-1011.
    10. Wang, Yanxiang & Ali Almazrooei, Shaikha & Kapsalyamova, Zhanna & Diabat, Ali & Tsai, I-Tsung, 2016. "Utility subsidy reform in Abu Dhabi: A review and a Computable General Equilibrium analysis," Renewable and Sustainable Energy Reviews, Elsevier, vol. 55(C), pages 1352-1362.
    11. 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.
    12. Nwachukwu, Maxwell Umunna & Chike, Harold, 2011. "Fuel subsidy in Nigeria: Fact or fallacy," Energy, Elsevier, vol. 36(5), pages 2796-2801.
    13. Lin, Boqiang & Kuang, Yunming, 2020. "Natural gas subsidies in the industrial sector in China: National and regional perspectives," Applied Energy, Elsevier, vol. 260(C).
    14. Jiang, Zhujun & Lin, Boqiang, 2014. "The perverse fossil fuel subsidies in China—The scale and effects," Energy, Elsevier, vol. 70(C), pages 411-419.
    15. Li, Aijun & Lin, Boqiang, 2013. "Comparing climate policies to reduce carbon emissions in China," Energy Policy, Elsevier, vol. 60(C), pages 667-674.
    16. Julian Lampietti, 2004. "Power's Promise : Electricity Reforms in Eastern Europe and Central Asia," World Bank Publications - Books, The World Bank Group, number 14936, December.
    17. Xu, Shang & Zhang, Jun, 2023. "The welfare impacts of removing coal subsidies in rural China," Energy Economics, Elsevier, vol. 118(C).
    18. Bah, Muhammad Maladoh & Saari, M. Yusof, 2020. "Quantifying the impacts of energy price reform on living expenses in Saudi Arabia," Energy Policy, Elsevier, vol. 139(C).
    19. Zahra Zarepour, 2022. "Short- and long-run macroeconomic impacts of the 2010 Iranian energy subsidy reform," SN Business & Economics, Springer, vol. 2(10), pages 1-32, October.
    20. Alberini, Anna & Khymych, Olha & Ščasný, Milan, 2020. "Responsiveness to energy price changes when salience is high: Residential natural gas demand in Ukraine," Energy Policy, Elsevier, vol. 144(C).

    More about this item


    Energy subsidies; Input–output modeling; Price-gap approach; Ukraine; CO 2 ;
    All these keywords.

    JEL classification:

    • D57 - Microeconomics - - General Equilibrium and Disequilibrium - - - Input-Output Tables and Analysis
    • P22 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - Prices
    • P28 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - Natural Resources; Environment
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices


    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:spr:jecstr:v:2:y:2013:i:1:p:1-27:10.1186/2193-2409-2-7. See general information about how to correct material in RePEc.

    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.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with 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.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.