Lessons Drawn from Reforms of Energy Subsidies

The report examines the adverse effects of energy subsidies, such as market distortions and hindered clean energy investment, while analyzing national case studies to determine successful reform strategies. It highlights that abrupt price increases often lead to public unrest and policy reversal, whereas gradual adjustments, transparent communication, and targeted social safety nets—such as cash transfers—increase the likelihood of sustainable reform.

• Energy subsidies can create significant market distortions, including the discouragement of cost-minimization strategies by producers and the promotion of wasteful consumption by consumers. For instance, fuel efficiency in the Middle East is reported as exceptionally low, with vehicle fuel consumption more than double that of countries without such subsidies.
• Global spending on fossil fuel subsidies increased by 30% between 2010 and 2011, reaching US$ 532 billion. The International Energy Agency (IEA) notes that these subsidies primarily benefit oil, gas, nuclear, and renewables over coal.
• Abrupt removal of subsidies without adequate communication or gradual phasing often triggers severe public backlash and political instability. In Bolivia, an instant price increase of over 80% led to strikes and the rapid reinstatement of subsidies, while in Nigeria, an abrupt end to subsidies caused gas prices to jump from US$ 0.40 to US$ 0.86 per litre, resulting in violent protests.
• Successful reform strategies often involve gradual price adjustments and the reallocation of subsidy savings into social protection measures. Iran successfully avoided riots despite massive price hikes (e.g., diesel increasing 1,000%) by providing monthly cash payments to citizens. Similarly, Ghana used a poverty impact assessment to justify reforms and funded free schooling and rural electrification to assist the poor.
• China employs a strategic approach to subsidies to ensure energy security and support economic growth, utilizing a tiered electricity pricing system and specific subsidies for shale gas production (0.4 yuan per cubic metre from 2012 to 2015).
• Chile has managed price volatility through a Consumers’ Protection System that uses a price band based on a five-month window; taxes are reduced if prices exceed the ceiling and increased if they fall below the floor, making the system revenue-neutral.
• Jordan successfully reduced energy subsidies from 5.8% of GDP to 0.4% by 2010 by implementing a monthly price adjustment formula based on international prices, though rising living costs later pressured the government to reverse some steps in 2011.

APA

World Economic Forum (2013). Lessons Drawn from Reforms of Energy Subsidies. http://www3.weforum.org/docs/GAC13/WEF_GAC13_LessonsReformsEnergySubsidies_Report.pdf

Chicago

World Economic Forum. Lessons Drawn from Reforms of Energy Subsidies. 2013. http://www3.weforum.org/docs/GAC13/WEF_GAC13_LessonsReformsEnergySubsidies_Report.pdf.

Wikipedia

{{cite report |author=World Economic Forum |title=Lessons Drawn from Reforms of Energy Subsidies |date=2013 |url=http://www3.weforum.org/docs/GAC13/WEF_GAC13_LessonsReformsEnergySubsidies_Report.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{worldeconomicforum2013lessons, author = {{World Economic Forum}}, title = {{Lessons Drawn from Reforms of Energy Subsidies}}, institution = {World Economic Forum}, year = {2013}, url = {http://www3.weforum.org/docs/GAC13/WEF_GAC13_LessonsReformsEnergySubsidies_Report.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }