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Global Energy Subsidies: An Analytical Taxonomy

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  • Ross McKitrick

    () (Department of Economics and Finance, University of Guelph)

Abstract

Governments around the world have pledged to eliminate or sharply reduce subsidies to energy firms in order to increase economic efficiency and reduce environmental externalities. Yet definitions of subsidies vary widely and, as a result, estimates of their global magnitude vary by orders of magnitude. I review why energy subsidies are so difficult to define and measure. I show why some non-standard measures are very poor proxies for subsidy costs and in fact may vary inversely with them. In particular, recent attempts to treat unpriced externalities as subsidies yield especially misleading results. In general, energy subsidies as conventionally understood do exist but only comprise a small portion of some very large recently-reported estimates, the bulk of which are indirect measures that may have little connection with actual costs to governments or allocational inefficiencies.

Suggested Citation

  • Ross McKitrick, 2016. "Global Energy Subsidies: An Analytical Taxonomy," Working Papers 1609, University of Guelph, Department of Economics and Finance.
    • Handle: RePEc:gue:guelph:2016-09
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    Cited by:

    1. Cailou Jiang & Ying Zhang & Maoliang Bu & Weishu Liu, 2018. "The Effectiveness of Government Subsidies on Manufacturing Innovation: Evidence from the New Energy Vehicle Industry in China," Sustainability, MDPI, Open Access Journal, vol. 10(6), pages 1-11, May.
    2. Sumin Hu & Shulin Liu & Die Li & Yuxuan Lin, 2019. "How Does Regional Innovation Capacity Affect the Green Growth Performance? Empirical Evidence from China," Sustainability, MDPI, Open Access Journal, vol. 11(18), pages 1-21, September.
    3. Boyce, James K., 2018. "Carbon Pricing: Effectiveness and Equity," Ecological Economics, Elsevier, vol. 150(C), pages 52-61.
    4. Zhang, Lei & Qin, Quande & Wei, Yi-Ming, 2019. "China's distributed energy policies: Evolution, instruments and recommendation," Energy Policy, Elsevier, vol. 125(C), pages 55-64.
    5. Wu, Shu, 2020. "The evolution of rural energy policies in China: A review," Renewable and Sustainable Energy Reviews, Elsevier, vol. 119(C).

    More about this item

    Keywords

    Subsidies; energy; oil; gas; externalities; fiscal policy;

    JEL classification:

    • Q35 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Hydrocarbon Resources
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

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