Europe and Central Asia Balancing Act : Cutting Subsidies, Protecting Affordability, and Investing in the Energy Sector in Eastern Europe and Central Asia Region
The cost of energy in Eastern Europe and Central Asia, as elsewhere, is an important policy issue, as shown by the concerns for energy affordability during the past harsh winter. Governments try to moderate the burden of energy expenditures that is...
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| Language: | English en_US |
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Washington, DC
2012
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| Online Access: | http://documents.worldbank.org/curated/en/2012/06/16630389/europe-central-asia-balancing-act-cutting-subsidies-protecting-affordability-investing-energy-sector-eastern-europe-central-asia-region http://hdl.handle.net/10986/11910 |
| Summary: | The cost of energy in Eastern Europe and
Central Asia, as elsewhere, is an important policy issue, as
shown by the concerns for energy affordability during the
past harsh winter. Governments try to moderate the burden of
energy expenditures that is experienced by households
through subsidies to the energy providers, so that
households pay tariffs below the cost recovery level for the
energy they use. These subsidies result in significant
pressures on government budgets when international prices
rise. They also provide perverse incentives for the
overconsumption of energy as households do not pay the true
cost of energy, and therefore, have fewer incentives to save
or to invest in energy efficiency. Balancing competing
claims-fiscal and environmental concerns which would push
for raising energy tariffs on the one hand and affordability
and political economy concerns which push for keeping
tariffs artificially low on the other-is a task that policy
makers in the region are increasingly unable to put off.
Addressing this issue is all the more pressing as the
ongoing crisis continues to add stress to government
budgets, and that international energy prices remain high.
This is the first report to assess, at the micro level for
the whole region, the distributional impact of raising
energy tariffs to cost recovery levels and to simulate
policy options to cushion these impacts. |
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