Switching the lights off: The impact of energy tariff increases on households in the Kyrgyz Republic
Raising energy prices to cost-recovery tariffs has several implications. The implicit (quasi-fiscal) subsidization of the energy sector will be reduced to a large extent. Energy companies will have higher revenues, and consumers will be faced with a major increase of their energy bills and potentially high welfare losses. Removing subsidies affects poor households more as they spend on average a larger share of household income on energy and because they have fewer options to adjust their energy consumption. This paper analyses the impact of higher energy tariffs on households in the Kyrgyz Republic using micro-data from the Kyrgyz Integrated Household Survey 2009. It aims at answering the question which households will be most affected by higher energy tariffs and to what extent mitigation measures, such as lifeline tariffs or direct cash transfers could soften the impact on poor and vulnerable households. The analysis focuses on first-order effects and uses benefit incidence analysis and static micro-simulation to estimate expected costs and benefits of higher energy prices and the corresponding mitigation measures. Results suggest that both the type of energy and the level of connectedness matter. Increasing tariffs for thermal power used for central heating and hot water mainly affects richer households in urban areas. Reducing implicit electricity subsidies affects the whole population due to nearly full country coverage with electricity connections. Lifeline tariffs for electricity could mitigate the effect of higher tariffs to a certain extent as long as households have actual control over their consumption. However, all households would benefit equally. Direct cash transfers targeted at poor households improve the targeting performance and lower the costs compared to universal subsidies.
|Date of creation:||2012|
|Contact details of provider:|| Postal: P.O. Box 616, 6200 MD Maastricht|
Phone: (31) (0)43 3883875
Fax: (31) (0)43 3216518
Web page: http://www.merit.unu.edu/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Wodon, Quentin & Ajwad, Mohamed Ishan & Siaens, Corinne, 2003. "Lifeline or Means-Testing? Electric Utility Subsidies in Honduras," MPRA Paper 15419, University Library of Munich, Germany.
- 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.
- Massimo Filippini & Shonali Pachauri, 2002.
"Elasticities of Electricity Demand in Urban Indian Households,"
CEPE Working paper series
02-16, CEPE Center for Energy Policy and Economics, ETH Zurich.
- Filippini, Massimo & Pachauri, Shonali, 2004. "Elasticities of electricity demand in urban Indian households," Energy Policy, Elsevier, vol. 32(3), pages 429-436, February.
- Vivien Foster, 2000. "Measuring the Impact of Energy Reform : Practical Options," World Bank Other Operational Studies 11432, The World Bank.
- Kristin Komives & Vivien Foster & Jonathan Halpern & Quentin Wodon, 2005.
"Water, Electricity, and the Poor : Who Benefits from Utility Subsidies?,"
World Bank Publications,
The World Bank, number 6361.
- Kristin Komives & Vivien Foster & Jonathan Halpern & Quentin Wodon & Roohi Abdullah, 2008. "Water, Electricity, and the Poor : Who Benefits from Utility Subsidies?," World Bank Other Operational Studies 11745, The World Bank.
- Margaret Grosh & Carlo del Ninno & Emil Tesliuc & Azedine Ouerghi, 2008. "For Protection and Promotion : The Design and Implementation of Effective Safety Nets," World Bank Publications, The World Bank, number 6582.
- Komives, Kristin & Halpern, Jonathan & Foster, Vivien & Wodon, Quentin & Abdullah, Roohi, 2006. "The distributional incidence of residential water and electricity subsidies," Policy Research Working Paper Series 3878, The World Bank.
- Foster, James & Greer, Joel & Thorbecke, Erik, 1984. "A Class of Decomposable Poverty Measures," Econometrica, Econometric Society, vol. 52(3), pages 761-766, May.
- Kilian, Lutz, 2007.
"The Economic Effects of Energy Price Shocks,"
CEPR Discussion Papers
6559, C.E.P.R. Discussion Papers.
- World Bank, 2011. "Kyrgyz Republic - Profile and Dynamics of Poverty and Inequality, 2009," World Bank Other Operational Studies 2787, The World Bank.
- Freund, Caroline & Wallich, Christine, 1997. "Public-Sector Price Reforms in Transition Economies: Who Gains? Who Loses? The Case of Household Energy Prices in Poland," Economic Development and Cultural Change, University of Chicago Press, vol. 46(1), pages 35-59, October.
- Zhang, Fan, 2011. "Distributional impact analysis of the energy price reform in Turkey," Policy Research Working Paper Series 5831, The World Bank.
- Peter C. Reiss & Matthew W. White, 2005. "Household Electricity Demand, Revisited," Review of Economic Studies, Oxford University Press, vol. 72(3), pages 853-883.
- Shang-Jin Wei, 1997. "Gradualism versus Big Bang: Speed and Sustainability of Reforms," Canadian Journal of Economics, Canadian Economics Association, vol. 30(4), pages 1234-1247, November.
- Baker, Paul & Blundell, Richard & Micklewright, John, 1989. "Modelling Household Energy Expenditures Using Micro-data," Economic Journal, Royal Economic Society, vol. 99(397), pages 720-738, September.
- David Coady, 2004. "Targeting Outcomes Redux," World Bank Research Observer, World Bank Group, vol. 19(1), pages 61-85.
- Schüring, Esther & Gassmann, Franziska, 2012. "Whom to target: an obvious choice?," MERIT Working Papers 028, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
- Isabell Adenauer & Javier Arze del Granado, 2011. "Burkina Faso; Policies to Protect the Poor From the Impact of Food and Energy Price Increases," IMF Working Papers 11/202, International Monetary Fund.
- World Bank, 2004. "Azerbaijan - Raising Rates : Short-Term Implications of Residential Electricity Tariff Rebalancing," World Bank Other Operational Studies 14381, The World Bank.
- Julian A. Lampietti & Sudeshna Ghosh Banerjee & Amelia Branczik, 2007. "People and Power : Electricity Sector Reforms and the Poor in Europe and Central Asia," World Bank Publications, The World Bank, number 7175.
When requesting a correction, please mention this item's handle: RePEc:unm:unumer:2012066. 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: (Ad Notten)
If references are entirely missing, you can add them using this form.