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Energy Subsidies and Energy Consumption: A Cross-Country Analysis

Author

Listed:
  • Mr. Joshua Charap
  • Mr. Arthur Ribeiro da Silva
  • Mr. Pedro C Rodriguez

Abstract

The economic and environmental implications of energy subsidies have received renewed attention from policymakers and economists in recent years. Nevertheless there remains significant uncertainty regarding the magnitude of the impact of energy subsidies on energy consumption. In this paper we analyze a panel of cross-country data to explore the responsiveness of energy consumption to changes in energy prices and the implications of our findings for the debate on energy subsidy reform. Our findings indicate a long-term price elasticity of energy demand between -0.3 and -0.5, which suggests that countries can reap significant long-term benefits from the reform of energy subsidies. Our findings also indicate that short-term gains from subsidy reform are likely to be much smaller, which suggests the need for either a gradual approach to subsidy reform or for more generous safety nets in the short term.

Suggested Citation

  • Mr. Joshua Charap & Mr. Arthur Ribeiro da Silva & Mr. Pedro C Rodriguez, 2013. "Energy Subsidies and Energy Consumption: A Cross-Country Analysis," IMF Working Papers 2013/112, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2013/112
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    Citations

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    Cited by:

    1. Parry, Ian, 2020. "Increasing carbon pricing in the EU: Evaluating the options," European Economic Review, Elsevier, vol. 121(C).
    2. Adetutu, Morakinyo O., 2014. "Energy efficiency and capital-energy substitutability: Evidence from four OPEC countries," Applied Energy, Elsevier, vol. 119(C), pages 363-370.
    3. Troug, Haytem & Murray, Matt, 2015. "The Effects of Asymmetric Shocks in Oil Prices on the Performance of the Libyan Economy," MPRA Paper 68705, University Library of Munich, Germany.
    4. Hertog, Steffen, 2020. "Reforming wealth distribution in Kuwait: estimating costs and impacts," LSE Research Online Documents on Economics 105564, London School of Economics and Political Science, LSE Library.
    5. Hertog, Steffen, 2017. "Making wealth sharing more efficient in high-rent countries: the citizens’ income," LSE Research Online Documents on Economics 101305, London School of Economics and Political Science, LSE Library.
    6. Pacudan, Romeo & Hamdan, Mahani, 2019. "Electricity tariff reforms, welfare impacts, and energy poverty implications," Energy Policy, Elsevier, vol. 132(C), pages 332-343.

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