Aimed at policy makers, government officials in finance and line ministries, nongovernmental organizations, and development practitioners, this report analyzes the distributional impact of raising energy tariffs in Eastern Europe and Central Asia to cost recovery levels and alternative policy options to lessen these impacts. Laderchi, Olivier, and Trimble (a team working in the regional poverty group of the World Bank) describe how current tariff levels for households, which are low due to large subsidies to the energy sector, are not sustainable for governments and that countries will have to reform tariffs to cover the full economic cost of energy generation and distribution. They aim to balance the need to respond to fiscal pressures and environmental concerns as well as the concerns about social impact and the political economy of reform and the strain on household budgets. They draw on a household survey focusing on electricity and gas and analyze the factors of prices, regulations, and investments, which determine the cost of energy, and the subsidies, sectoral policies, and social protection policies that influence affordability. They show that reforms characterized by the gradual reduction of subsidies to the energy sector and stepped up investment in demand management and protection for the poorest groups can help countries manage energy expenditures and affordability for households. The report is part of a series of three regional reports of the Regional Study Program of the Europe and Central Asia Region of the World Bank. There is no index. Annotation ©2013 Book News, Inc., Portland, OR (booknews.com)
In Eastern Europe and Central Asia there are significant pressures for residential energy tariffs to rise, as government budgets are increasingly stretched and cannot afford to pay large energy subsidies. Further pressures for tariffs to rise come from environmental concerns, as the tariff levels that households now face do not cover the social costs of energy production. Because reforms that would increase energy tariffs are likely to affect significantly the poor and the middle class, their political feasibility may be questioned unless appropriate ways of cushioning the impacts can be devised.Balancing these competing claimsfiscal and environmental concerns on the one hand, affordability and political economy concerns on the otheris a task that policy makers in the region are increasingly unable to put off.While challenging, the reforms needed for this balancing act can build on much that has been learned in the last decade in terms of improving the effectiveness of social assistance systems and increasing energy efficiency. This report suggests that a policy agenda that focuses on cutting subsidies to the energy sector, while investing in energy efficiency and supporting households at the bottom of the distribution, amounts to a new wave of policy reforms for the energy sector in transition countries. The feasibility of such an integrated policy agenda and the ability of these policies to balance the competing claims of fi scal responsibility and social concerns are explored through different policy scenarios, which, in their simplicity, help clarify the parameters of the policy choices many countries ECA are facing.This report is a part of a series of 3 regional reports. The series includes Growing green: The economic benefits of climate action in Europe and Central Asia, Balancing act: Cutting energy subsidies and protecting affordability and Lessons learned from energy efficiency success cases.
