Energy Subsidies and Energy Consumption: A Cross-Country Analysis

By Joshua Charap, Arthur Ribeiro da Silva, Pedro C Rodriguez

May 16, 2013

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Format: Chicago

Joshua Charap, Arthur Ribeiro da Silva, and Pedro C Rodriguez. Energy Subsidies and Energy Consumption: A Cross-Country Analysis, (USA: International Monetary Fund, 2013) accessed December 21, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

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.

Subject: Consumption, Demand elasticity, Economic theory, Energy prices, Energy pricing, Fuel prices, National accounts, Price elasticity, Prices

Keywords: Consumption, Demand elasticity, Elasticity, Elasticity estimate, Elasticity of energy demand, Energy, Energy consumption, Energy prices, Estimate, Estimation strategy, Fuel prices, Income elasticity, Interaction terms, Middle East, OLS estimation, Price, Price difference, Price elasticities in the range, Price elasticity, Subsidy, WP

Publication Details

Pages:

20
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2013/112
Stock No:

WPIEA2013112
ISBN:

9781484367247
ISSN:

1018-5941

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