The Effects Of Energy Subsidies On The Consumer, The...

Abstract Subsidies are one of the most powerful policy tools in the hands of the government. They have been used for decades to achieve a range of economic, social and environmental objectives. Indeed, one of the most important and challenging responsibilities of a government is allocating financial resources to achieve public good. This paper analyses the effects of energy subsidies on the consumer, the economy and the energy industry. Energy subsidies are any government actions that support the cost of energy production in terms of reduction in prices paid by consumers and increase in revenues to energy producers (World Bank, 2010). These investments aim to improve energy access by making prices more affordable, shielding domestic consumers from international price volatility and supporting energy intensive industries (The International Institute for sustainable development, 2012). In practice, energy subsidies come in different forms. (The IEA, 2002) and (UNEP, 2008) identify the following typical mechanisms by which governments support the production and consumption of energy: †¢ Direct financial transfers: grants to consumers, grants to producers, low-interest or preferential loans and government loan guarantees; †¢ Preferential tax treatment: tax credits, tax rebates, exemptions on royalties, duties or tariffs, reduced tax rates, deferred tax liabilities and accelerated depreciation on energy-supply equipment; †¢ Trade restrictions: tariffs, tariff-rate import quotasShow MoreRelatedFossil Fuel Subsidy Reform :1504 Words   |  7 PagesFOSSIL-FUEL SUBSIDY REFORM Intro The US spent 699 billion dollars to subsidize the fossil-fuel sector in 2015. The removal of fossil-fuel subsidy will enormously benefit energy markets, strengthen climate change policy and government budgets. 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