Subsidy Swap: Reducing fossil fuel subsidies through energy efficiency and renewable energy in Zambia

The report investigates the potential for Zambia to transition from fossil fuel subsidies to sustainable energy investments. It identifies that while petroleum subsidies were largely eliminated in 2016, significant subsidies remain in the electricity sector, particularly for the mining industry. The authors propose two 'subsidy swaps': redirecting electricity subsidies to fund energy efficiency in mining and replacing expensive diesel generators with solar PV. The report concludes that both are feasible, with solar PV already progressing through initiatives like Scaling Solar and GET FiT, while the mining sector swap requires further research into energy savings potential and fund administration.

• Zambia's electricity demand is growing faster than its supply, with a peak demand of 1,949 MW in 2015 against a peak generation of 1,281 MW, resulting in a 668 MW deficit.
• The mining sector is the largest electricity consumer in Zambia, accounting for 55 per cent of all electricity consumed in the country.
• Between September 2015 and May 2016, combined fuel and electricity subsidies in Zambia cost a total of USD 576 million, with fuel subsidies averaging USD 36 million per month and electricity subsidies averaging USD 26 million per month.
• While petroleum consumption subsidies were effectively eliminated in October 2016, electricity tariffs remain below the cost of supply, particularly for the mining sector.
• Zambia's mining tariffs are significantly lower than regional averages; the 2017 mining tariff of 9.30 U.S. cents per kWh is only 55 per cent of the 2014 sub-Saharan African median commercial tariff of 17 U.S. cents per kWh.
• The report identifies a 'subsidy swap' for the mining sector as feasible, suggesting that redirecting subsidies to promote energy efficiency could reduce overall energy costs for companies while saving the government on subsidies.
• International evidence suggests that mining energy efficiency measures, such as optimizing comminution (grinding and crushing), can decrease energy use by 10–50 per cent.
• Replacing diesel generation with solar PV is feasible and already underway; for example, the Scaling Solar project's first round of auctions yielded bids of 6–7 U.S. cents per kWh.
• ZESCO estimates that connecting all districts currently relying on diesel-generated power to the national grid would save approximately USD 8 million in annual fuel costs.
• Stakeholder analysis indicates that while government agencies are broadly supportive of subsidy reform and renewables, mining companies and residential consumers are likely to oppose price increases without mitigation measures.

APA

Bridle, R., Halonen, M., Klimscheffskij, M., Mukumba, C., & Siwabamundi, C. (2018). Subsidy Swap: Reducing fossil fuel subsidies through energy efficiency and renewable energy in Zambia. International Institute for Sustainable Development. https://www.iisd.org/system/files/publications/subsidy-swap-zambia.pdf

Chicago

Bridle, Richard, Mikko Halonen, Markus Klimscheffskij, Chenai Mukumba, and Charity Siwabamundi. Subsidy Swap: Reducing fossil fuel subsidies through energy efficiency and renewable energy in Zambia. International Institute for Sustainable Development, 2018. https://www.iisd.org/system/files/publications/subsidy-swap-zambia.pdf.

Wikipedia

{{cite report |last1=Bridle |first1=Richard |last2=Halonen |first2=Mikko |last3=Klimscheffskij |first3=Markus |last4=Mukumba |first4=Chenai |last5=Siwabamundi |first5=Charity |title=Subsidy Swap: Reducing fossil fuel subsidies through energy efficiency and renewable energy in Zambia |publisher=International Institute for Sustainable Development |date=October 2018 |url=https://www.iisd.org/system/files/publications/subsidy-swap-zambia.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{bridle2018subsidy, author = {Bridle, Richard and Halonen, Mikko and Klimscheffskij, Markus and Mukumba, Chenai and Siwabamundi, Charity}, title = {{Subsidy Swap: Reducing fossil fuel subsidies through energy efficiency and renewable energy in Zambia}}, institution = {International Institute for Sustainable Development}, year = {2018}, month = oct, url = {https://www.iisd.org/system/files/publications/subsidy-swap-zambia.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }