TECHNICAL REPORT ENERGY SUBSIDY REFORM IN ACTION POLITICAL ECONOMY ANALYSIS AND COMMUNICATIONS FOR ENERGY SUBSIDY REFORMS Approaches and Insights from Recent Technical Assistance TECHNICAL REPORT ENERGY SUBSIDY REFORM IN ACTION POLITICAL ECONOMY ANALYSIS AND COMMUNICATIONS FOR ENERGY SUBSIDY REFORMS Approaches and Insights from Recent Technical Assistance Tom Moerenhout, Defne Gencer, Beatriz Arizu, Min A Lee, and Hannah Braun ABOUT ESMAP The Energy Sector Management Assistance Program (ESMAP) is a partnership between the World Bank and over 20 partners to help low- and middle-income countries reduce poverty and boost growth through sustainable energy solutions. ESMAP’s analytical and advisory services are fully integrated within the World Bank’s country financing and policy dialogue in the energy sector. Through the WB, ESMAP works to accelerate the energy transition required to achieve Sustainable Development Goal 7 (SDG7), which ensures access to affordable, reliable, sustainable, and modern energy for all. It helps shape WB strate- gies and programs to achieve the WB Climate Change Action Plan targets. Learn more at: https://www. esmap.org. © 2024 March | International Bank for Reconstruction and Development / The World Bank 1818 H Street NW, Washington, DC 20433 Telephone: 202-473-1000; Internet: www.worldbank.org Some rights reserved. ABOUT THIS SERIES This report is part of the “Energy Subsidy Reform in Action” series produced by the ESMAP Energy Subsidy Reform Facility, with the objective of drawing insights from recent experiences and emerging approaches related to reform of energy subsidies in developing countries. The series includes issue- specific reports from various relevant domains such as energy sector reform, macroeconomic and fiscal policy, carbon pricing, poverty and distributional analysis, social protection, political economy, and communications. Rights and Permissions The material in this work is subject to copyright. Because the World Bank encourages dissemination of its knowledge, this work may be reproduced, in whole or in part, for noncommercial purposes if full attribution to this work is given. Any queries on rights and licenses, including subsidiary rights, should be addressed to World Bank Publications, World Bank Group, 1818 H Street NW, Washington, DC 20433, USA; fax: +1-202-522-2625; e-mail: pubrights@worldbank.org. Furthermore, the ESMAP Program Manager would appreciate receiving a copy of the publication that uses this publication for its source sent in care of the address above, or to esmap@worldbank.org. This work is available under the Creative Commons Attribution 3.0 IGO license (CC BY 3.0 IGO) http://creativecommons.org/licenses/by/3.0/igo. Under the Creative Commons Attribution license, you are free to copy, distribute, transmit, and adapt this work, including for commercial purposes, under the following conditions: Attribution—Moerenhout, Tom, Defne Gencer, Beatriz Arizu, Min A Lee, and Hannah Braun. 2024. Political economy analysis and communications for energy subsidy reforms: Approaches and Insights from Recent Technical Assistance. Energy Subsidy Reform in Action Series. ESMAP Technical Report. Washington, DC: World Bank. License: Creative Commons Attribution CC BY 3.0 IGO. Third-Party Content—The World Bank does not necessarily own each component of the content contained within the work and does not warrant that the use of any third-party owned individual component or part contained in the work will not infringe on the rights of those third parties. If you wish to reuse a component of the work, it is your responsibility to determine whether permission is needed for that reuse and to obtain permission from the copyright owner. Examples of components can include, but are not limited to, tables, figures, or images. Production Credits Designer | Laura C. Johnson Contents Abbreviations v Acknowledgments vi Executive Summary vii 1 The Why: Background xx 2 The What: Stocktaking of PEA and Communications Activities 6 3 The How: Activity Design and Implementation Approaches 10 Political economy analysis support 11 Communications support 12 4 The What: Key Findings and Insights from Activities 14 5 What Worked Well? Noteworthy Approaches 18 6 What Next: Strengthening PEA and Communications Support 22 Appendixes Appendix A. Examples of PEA design and findings under ESMAP grants 26 Appendix B. Examples of the interaction of PEA and communications components 32 References 34 CONTENTS iii List of Boxes and Tables List of Boxes Box 1.1: ESRF support approach 4 List of Tables Table 2.1: Coverage of retrospective review of political economy analysis and communications 7 Table A1.1: Examples of PEA design and key findings 26 iv CONTENTS Abbreviations ESMAP Energy Sector Management Assistance Program ESRAF Energy Subsidy Reform Assessment Framework ESRF Energy Subsidy Reform Facility FGD focus group discussion IDI in-depth interview LMIC lower-middle-income country PEA political economy analysis NGO nongovernmental organization POS public opinion survey UMIC upper-middle-income country All currency is in United States dollars (US$, USD), unless otherwise indicated. ABBREVIATIONS v Acknowledgments This report was prepared by staff and consultants of the Energy Subsidy Reform Facility (ESRF) of the Energy Sector Management Assistance Program (ESMAP). The main authors are Tom Moerenhout, Defne Gencer, Beatriz Arizu, Min A Lee, and Hannah Braun. The report draws on early-stage research and case studies by Hannah Braun and Tom Moerenhout, with inputs from Christopher Beaton and Mostafa Mostafa of the International Institute for Sustainable Development (IISD). The authors are thankful for the collaboration of current and former ESMAP staff who were involved in different stages of the study, from conceptualization to completion, including Yadviga Semikolenova, Sheoli Pargal, Joeri de Witt, Ludovica Efrati, Awele Okigbo, and Tanja Larsen. The authors are particularly thankful to Heather Worley and Verena Fritz for their insightful and helpful comments and advice as peer reviewers. Any errors of data or interpretation are the sole responsibility of the authors. The authors would like to acknowledge the contributions of Sherrie Brown for editing services, Laura Johnson for design, Heather Austin for publications, and Djeanane Monfort for administrative support. The team would like to thank Demetrios Papathanasiou (Global Director, EEX), Chandrasekar Govindarajalu (Practice Manager, ESMAP), and Gabriela Elizondo Azuela (Practice Manager, Latin America and Caribbean; former Practice Manager, ESMAP) for their managerial guidance and invaluable support. vi ACKNOWLEDGMENTS Executive Summary Understanding the political economy context and communicating effectively can contribute to the implementation and sustainability of energy subsidy reforms. Recent literature recognizes and emphasizes the importance of political economy and communications in the context of energy subsidy reforms. Experience shows that, for governments interested in reforming costly energy subsidies, developing a comprehensive understanding of the political economy context for the reform, along with finding an effective way to engage and communicate with the public, can be critical for delivering a successful reform effort. As part of an effort to contribute to the global knowledge base on energy subsidy reforms, a select set of technical assistance activities supported by the Energy Sector Management Assistance Program (ESMAP) were reviewed. The review assessed the role of political economy and communications in select World Bank technical assistance and advisory activities supporting developing country governments in real-world energy subsidy reform efforts, with funding from ESMAP, through its Energy Subsidy Reform Facility (ESRF) from 2014 to 2020. The exercise involved a high-level portfolio review, with a qualitative assessment of activity designs, implementation approaches, and experiences. This was followed by a detailed review of a sample set of activity outputs to gain insights into the substance of findings on political economy and communications approaches. The review found that 77 percent of the ESMAP-funded energy subsidy reform tech- nical assistance activities between 2014 and 2020 involved support to governments in developing countries on political economy analysis (PEA) and communications strategies. Out of the 52 activities funded through ESRF in the focus period, 32 (62 per- cent) involved advisory support on political economy aspects, and 33 (63 percent) involved support for development of communications strategies, while 25 (48 percent) included both. These figures represent a marked improvement over the levels reported in Inchauste and Victor (2017, 2), noting that an “internal stocktaking of analytical reports on energy subsidies by Bank teams over the past 10 years found that only a quarter of them under- take some analysis of the political economy of reforms.” These activities covered 43 coun- tries in Sub-Saharan Africa, the Middle East and North Africa, and Europe and Central Asia, hinting at the relevance of PEA and communications support across countries. The review of ESMAP-funded PEA and communications work generated some obser- vations on the design and scope of technical assistance activities that can be useful for practitioners. Key observations are summarized below. POLITICAL ECONOMY ANALYSIS AND COMMUNICATIONS FOR ENERGY SUBSIDY REFORMS vii • The political economy analyses were often undertaken using evidence-based approaches. These included a combination of research, public opinion surveys, focus group discussions, in-depth interviews, and stakeholder analyses. Several involved the development of stakeholder influence-interest matrixes to visualize findings. • Advancing beyond traditional sectoral or macro assessments, some of the activities adopted problem-driven PEA approaches that conduct deeper assessments for the specific reform. These activities explored specific reform governance and institutional challenges, the influence and interests of stakeholders, foreseeable implementation challenges, and previous attempts to implement similar reforms. • For communications, technical assistance supported the development of communica- tions strategies, while implementation of campaigns and the development of communi- cation materials were the responsibility of the government. • Work on communications strategies tended to focus on audience segmentation, com- munication methods, messaging, messengers, and trusted channels of communication. For a few activities, media reviews were used to inform engagement approaches. • Several activities supported governments in the creation of committees to strengthen coordination and support the implementation of communication efforts. These commit- tees brought together key ministries and other decision-makers to share information about critical elements of the communications strategy to ensure awareness, consis- tency, and alignment on messages across government agencies involved. • Two-thirds of the activities with communications support focused on strengthening the capacity of key communications staff within the government, the utility, or both. • The majority of communications activities involved strong government counterpart demand and ownership—close to two-thirds were rated as having very strong govern- ment ownership. • Over the years, the use of gender-focused analyses became more prevalent. • Formal evaluations of communications support, including on the use and impact of outputs, were found to be fairly limited. The review of the substance of the PEA and communications outputs rendered useful findings and insights on energy subsidy reforms. As part of the review, a qualitative analysis of outputs in 33 activities was carried out. In addition, activities in six countries were subjected to in-depth assessments, output reviews, and interviews with World Bank task teams. A selection of the substantive findings of these outputs are summarized below. • Overall, PEA findings were consistent with established literature on this topic (Foster and Rana 2020; Fritz, Levy, and Ort 2014; Inchauste and Victor 2017; Moerenhout 2022; Skovgaard and van Asselt 2018), which indicates that various stakeholders are able to affect implementation of reform or its sustainability. • Several PEAs found small consumers and politically connected vested interests to be among key political stakeholders for energy subsidy reforms. • In many cases, there was a lack of awareness among consumers that they were receiv- ing subsidies. In several cases, inefficiencies in the energy sector were perceived to be the cause of energy price increases. viii EXECUTIVE SUMMARY POLITICAL ECONOMY ANALYSIS AND COMMUNICATIONS FOR ENERGY SUBSIDY REFORMS ix • Consumers in different contexts had concerns about the impact energy price increases would have on their livelihoods, both directly and via inflation. • Several opinion surveys found that high levels of distrust among stakeholders or toward authorities, where present, also translated into scepticism on messaging about energy subsidy reforms and the role of the government. • One of the most noteworthy and common findings in different countries was that stakeholders across highly varied contexts were not uniformly or invariably opposed to subsidy reform or tariff increases for energy services. • Multiple PEAs conducted in different contexts with varied challenges found that energy subsidy reforms could be more acceptable to consumers if the price changes were accompanied by tangible benefits. According to the surveys, stakeholders could be willing to accept price increases if energy service reliability or quality improved and if social assistance to mitigate the impact of price increases would be available. • The PEAs highlighted that clear, informative, and trustworthy communication on reform objectives and expected outcomes could help improve acceptability of reforms. • Trustworthiness of the individuals delivering the messages was important for stake- holders—the communicator needs to come across as honest, accessible, and easy to understand to help overcome the perceived or real trust deficit that may exist toward the broader government. PEAs and communications support activities can help build understanding and acceptance. Some insights on good practice approaches identified among the technical assistance activities reviewed are summarized below. • Activity sequencing matters. In good practice examples, PEAs were carried out first, and their findings were used to inform reform designs and communications strategies. • The timing of the PEA work, and its use to answer the right policy questions, can have an important bearing on its utility. Carrying out a PEA early on in a reform effort can add significant value and contribute meaningfully to achieving a reform design that anticipates the main risks and that includes actionable communications strategies. • Comprehensive PEAs combining multiple methods are essential for understanding the perspectives and influence of different stakeholders. • The level of detail and coverage of the PEA appeared to contribute to the comprehen- siveness and depth of the communications strategy that followed. • Communications strategies that recommended practical, actionable steps and that produced usable outputs appeared to be viewed as more effective. • For work on communications analysis and campaigns, strong ownership and steady involvement by government counterparts was important. The involvement of key decision-makers and reform champions in the development and delivery of the commu- nications campaigns was helpful for demonstrating strong government ownership. • The ability to engage the right mix of expertise, combining technical skills and country knowledge, has a bearing on the quality of communications strategies. Good practice examples combined international and seasoned local experts with multidisciplinary skills, working closely with the government teams. • The relevance and timeliness of communications strategies and outputs were facilitated by the availability of resources to mobilize expertise and by continued engagement. x EXECUTIVE SUMMARY Going forward, there are opportunities to strengthen technical assistance for energy subsidy reforms through well-designed and context-appropriate PEA and communi- cations support. The review helped identify new areas and approaches that can be con- sidered under future PEA and communications activities. These are summarized below. • In subsidy reform engagements, it is important to complement technical and analytical work with an effort to better understand the political and sectoral context within which reforms are pursued. Support for PEA and communications can enable improved understanding that can help governments further strengthen reform designs. • There may be opportunities to explore the use of problem-driven PEAs. The need for these instruments is especially prevalent in more sensitive and complex engagements. • Where appropriate, revisiting and periodically updating PEAs can allow recent develop- ments to be captured and stakeholder positions to be reevaluated for the continued relevance and usefulness of the analysis. PEA updates could be considered for multi- year reform efforts and dynamic environments where perspectives can evolve rapidly. • The importance of having adequate local understanding, expertise, and capacity in developing communications campaigns cannot be overemphasized. • Early assessment of communications capabilities can help governments identify and address capacity-building needs. Technical assistance can be useful for supporting governments in strengthening their own capacity to design and implement communica- tions campaigns that anticipate and respond to stakeholder concerns. • Activities can benefit from incorporating in their design, from the outset, plans for evaluating the use and impact of key PEA and communications outputs. Tracking whether PEA and communications strategy outputs were used or whether a particular approach had an impact can be helpful for future efforts. • Government ownership is critical. While technical assistance on PEAs and communica- tions strategies can facilitate a more nuanced understanding and strengthen reform design, the focus of technical assistance is on supporting governments in advancing their own reform agendas. The execution of the communications strategies, much like the reforms themselves, remains a decision that lies within the exclusive remit of the government. It is up to the government to decide to prioritize and dedicate the required resources to the implementation of the communications strategy. POLITICAL ECONOMY ANALYSIS AND COMMUNICATIONS FOR ENERGY SUBSIDY REFORMS xi ONE The Why: Background Governments around the world spend significant resources to subsidize the produc- tion and consumption of energy. Energy subsidies1 have been rising in recent years, except for a brief decline during the COVID-19 (coronavirus) pandemic. As of the end of 2022, aggregate global fossil fuel consumption subsidies exceeded US$1 trillion, according to estimates from the International Energy Agency (IEA 2023), driven by rising oil prices and government support measures introduced in response to the commodity price shocks of that year. Energy subsidies are the outcome of a complex set of factors and processes that prevail in a given context. Decisions related to the scope, coverage, and targeting of such subsidies are influenced by past and current government policy priorities for the economy, industries, firms, households, and the energy sector; the interests of stakeholder groups and the extent of their influence; and various institutional decision-making processes. Energy subsidies can be delivered through several different channels. These include wholesale or retail price controls on energy commodities, discounts in utility bills, tax reductions or exemptions, as well as fiscal transfers, low-cost or interest-free loans, or guarantees for energy producers. Even though these subsidies often have the stated objective of making energy affordable for the poor or targeted vulnerable populations, they benefit segments of society that are not necessarily poor or vulnerable. In fact, univer- sal price subsidies can be regressive, which, in simple terms, means that a greater share of the benefits accrue to higher income groups that consume more energy. Nonetheless, even when constituents are not the primary intended beneficiaries of these subsidies, they can become accustomed to receiving them, and over time, these subsidies risk becoming entrenched, creating vested interests. Even though energy subsidies are regressive, cause economywide distortions, and lead to significant fiscal and environmental impacts, reforming them continues to be highly politically sensitive. Reforming energy subsidies can be politically challenging because there is often a diverse set of stakeholders who benefit from those subsidies, including those who really need affordable energy as well as better-off households and firms that have grown accustomed to them, regardless of need. From the consumers’ perspective, in some cases, energy subsidies may be one of the few tangible benefits they receive from the government, while in other cases, those receiving subsidies may not even be aware of them, but still consider low prices to be a responsibility of the government. From the perspective of the political authority, low energy prices or energy subsidies can serve as instruments to help retain power and control political stakeholders (Cheon, Lackner, and Urpelainen 2014; Hartley and Medlock 2009; Overland 2010; Victor 2009), or direct benefits to key political stakeholders, thereby consolidating power (Cheon, Lackner, and Urpelainen 2014). Select literature on this topic finds that in democratic systems, those in power or those challenging the ruling coalition may use the promise of lower prices as a bargaining tool to maintain or gain power (Kojima 2016), while in more authoritarian settings, subsidies may be used to influence and maintain public support for the ruling elite (Overland 2010; van Beers and Strand 2013). 1. An energy subsidy is a deliberate policy action by the government that specifically targets electricity, fuels, or district heating and that results in a reduction in the net cost of energy purchased, a reduction in the cost of energy production or delivery or an increase in revenues retained by those engaged in energy production and delivery. For more, see Kojima (2017). POLITICAL ECONOMY ANALYSIS AND COMMUNICATIONS FOR ENERGY SUBSIDY REFORMS 1 Overall, political factors tend to play a central role in influencing subsidy reform outcomes. Some groups benefiting from subsidies can be well organized and politically influential, hence resist giving up a benefit they value. Vested interests—which involve a combination of stakeholders who perceive a risk of potential impacts from changes in energy prices, such as energy-intensive industrial enterprises, government entities, and different residential and agricultural consumer groups—can have a strong influence over whether, when, and how reforms happen. Depending on the context, the influence of these group may stem from their financial standing, political connections or power, ability to mobilize public opinion, or their sheer number, which allows them to act in favor of, or against, reform (Inchauste and Victor 2017). Energy price increases are sometimes followed by protests and strikes (Baig et al. 2007; Funke and Merrill 2019) when the reduction of subsidies, often combined with dissatisfaction with prevailing governance arrangements, may be interpreted as a modification of the social contract between government and the people (Fattouh, Moerenhout, and Sen 2016; Moerenhout 2017a, 2018; McCulloch, Moerenhout, and Yang 2021). As international experience has shown, even technically sound reform initiatives developed on solid analytical foundations can fail, sometimes before reaching imple- mentation stage, if they are not suitable for the political economy context and conditions at a given time. Therefore, understanding and assessing the context within which the subsidy reform effort will be pursued is crucial for the design and implementa- tion of effective energy subsidy reform. Understanding who benefits from the current subsidy regime, along with who stands to gain or lose from the reform, and by how much, 2 THE WHY: BACKGROUND and designing solutions to address those concerns can facilitate the development of more “implementable” reforms that are suitable for the environment. Assessing the potential distributional impacts of different reform options is a critical step toward understanding the political economy context, alongside engaging with stakeholders in a meaningful way, while also developing mitigation measures that address critical potential distributional and sectoral impacts. An important dimension is the way in which a government engages and communicates with key stakeholders and the general public about the proposed reform, outlining the disadvantages and costs of existing subsidies and explaining the reform rationale, benefits, and scope. An approach built on meaningful two-way engagement can help build trust, acceptance, and support over time. A growing body of energy subsidy reform literature has explored the critical role of political economy and communications in the context of reforms. The importance of understanding, assessing, and addressing political economy dimensions of energy subsidy reform, as well as approaches to communicating about reform, has been the focus of wider research by academia and think tanks, as well as by multilateral development agen- cies, whose support to governments increasingly incorporates these dimensions. Notable examples include Clements et al. (2013); Foster and Rana (2020); Fritz, Levey, and Ort (2014); Vagliasindi (2012); Inchauste and Victor (2017); Inchauste, Victor, and Schiffer (2018); Kojima, Bacon, and Trimble (2014); and Strand (2013), all of which recognize and emphasize the importance of political economy dimensions in the context of energy subsidy reform. To contribute to the body of knowledge in this field, this report attempts to draw practical insights from a set of technical assistance activities that supported real- world subsidy reform efforts. To this end, this report summarizes the main elements of a qualitative review of the technical assistance activities supported by the the Energy Sector Management Assistance Program (ESMAP), through its Energy Subsidy Reform Facility, with a special focus on political economy and communications. This empirical review docu- ments political economy and communications strategy designs, implementation approaches, and experiences on the ground in the context of ESMAP-funded technical assistance provided to developing-country government counterparts and their energy subsidy reform efforts. The review explores common approaches and findings from the diverse technical assistance provided across regions and is intended to contribute to strengthening the understanding of approaches that can be helpful for governments in the context of their energy subsidy reform efforts. Since its establishment in 2013, Energy Subsidy Reform Facility (ESRF) has been providing grants for technical assistance and advisory support to developing-country governments. Box 1.1 summarizes the main elements of ESRF support to energy subsidy reform efforts in developing countries. Between its establishment in 2013 and June 2023, ESRF provided 98 grants amounting to US$30 million in funding for technical assistance activities. Work under those activities informed the preparation or implementation of 64 World Bank lending operations with a total financing volume equivalent to US$24 billion. POLITICAL ECONOMY ANALYSIS AND COMMUNICATIONS FOR ENERGY SUBSIDY REFORMS 3 BOX 1.1 ESRF SUPPORT APPROACH The main channel through which the Energy Subsidy Reform Facility (ESRF) supports energy subsidy reform efforts in developing countries is through grant funding for technical assistance and advisory activities carried out by World Bank operational teams working with their government counterparts. In addition to these grants, ESRF also develops global knowledge products to document country experiences with reforms and to generate practical advice aimed at development practitioners and policy makers. As a compo- nent of its knowledge activities, ESRF developed a series of technical good practice notes as part of the Energy Subsidy Reform Assessment Framework (ESRAF), including those that focus on assessing potential distributional impacts of reforms using quantitative and qualitative methods, assessing the readiness of social protection systems to mitigate the impact of reforms, and assessing the political economy of energy subsidies and designing communications campaigns to improve the design and imple- mentation of reforms.a The Facility also supports global knowledge exchange, advocacy, and outreach. a. ESRAF Good Practice Notes 3, 4, 5, 8, and 9, available on the ESMAP website. This report takes stock of political economy analysis (PEA) and communications in the context of country-specific technical assistance activities supporting energy subsidy reforms that benefited from financial and technical support from ESMAP. Initiated as part of a retrospective assessment of technical assistance activities that ESRF has supported since its establishment, this report reviews designs and implementation approaches of World Bank–executed technical assistance activities. The assessment is based on a qualitative review of key outputs of select PEA and communications support activities carried out in the context of country grants. The report documents different approaches, assesses activity designs and outputs, and attempts to draw insights from emerging practices and substantive findings, along with making recommendations for future work. Key questions include, What practical approaches are used for providing techni- cal and advisory support to developing-country governments for political economy assessments and communications strategies in support of energy subsidy reform efforts? What good practice examples are available for assessing political economy dimensions, using them to inform reform designs by addressing key impacts and concerns identified and conducting meaningful stake- holder engagement to explain the reform and build support? 4 THE WHY: BACKGROUND The report aims to understand the way in which technical assistance support for PEA and communications was provided in response to requests from governments inter- ested in to reforming energy subsidies. In addition to taking a closer look at the types of technical support requested by government counterparts under ESMAP-funded World Bank technical assistance in these areas, the report takes a deeper look at approaches used in a select set of in-country activities. The report is intended to be a practical explora- tion of real-world technical assistance activities, and as such is aimed at development practitioners exploring the use of PEA and communications support in the context of country-level work. The report is not intended to be an exhaustive treatment of all approaches and academic literature on this topic, but rather an operationally focused analysis aimed at drawing practical insights, focusing on a very specific and small sample of activities. By providing examples from real-world technical assistance activities, document- ing approaches, and summarizing findings, as appropriate, this report is expected to contribute to the broader knowledge base and to complement the existing comprehensive academic and analytical literature. After reviewing the sample set of activities, the report considers how these observations support or contrast with observations from recent literature, where feasible. POLITICAL ECONOMY ANALYSIS AND COMMUNICATIONS FOR ENERGY SUBSIDY REFORMS 5 TWO The What: Stocktaking of PEA and Communications Activities 6 THE WHAT: STOCKTAKING OF PEA AND COMMUNICATIONS ACTIVITIES The retrospective assessment focused on a set of real-world technical assistance and advisory activities supported by ESRF between 2014 and 2020. Over that period, ESRF supported 68 grants. Out of this larger set, the review covered 52 technical assistance grants in 43 countries after eliminating grants that were regional or global in nature and thus not deemed relevant for this review that focused on political economy analysis (PEA) and communications support in country-specific work. Table 2.1 summarizes the body of work reviewed for this exercise. The rest of this chapter offers observations about the activities reviewed, focusing on the coverage, scope, and design of activities supported and summarized below. TABLE 2.1 Coverage of retrospective review of political economy analysis and communications Countries Activities Activities Activities with Activities with PEA and/or Activities supported covered in with PEA communications communications support with both review support 43 52 32 33 40 25 Three-quarters of the country-specific technical assistance grants reviewed for this exercise involved PEAs, strategic communications, or both in the context of energy subsidy reform. In aggregate, 40 out of 52 (77 percent) activities involved (1) analyses for understanding the political economy context within which energy subsidy reforms were being considered, (2) support to governments in the development of communications strategies to support those reforms, or (3) both. These grants, provided through World Bank task teams, supported government counterparts in the development of PEAs, stake- holder assessments, public opinion research, and the development of communications strategies. The presence of activities in 43 countries across Sub-Saharan Africa, the Middle East and North Africa, and Europe and Central Asia highlights the geographic ubiquity of demand for technical assistance support for PEA and communications across regions. With regard to sector and fuel coverage, the majority of the technical assistance activities focused on electricity tariff reforms; the remainder focused on petroleum products, district heating, and natural gas. Of the 52 country-level energy subsidy reform activities reviewed, 32 (62 percent) involved advisory support on political economy aspects, and 33 (63 percent) involved strategic communications support. Of the 52 Energy Sector Management Assistance Program (ESMAP)-funded activities supported between 2014 and 2020, 25 activities (48 percent) included support to government counterparts on both PEA and communications. Of the total, 22 included support for the development of a full communications strategy, and 19 of those 22 relied on an evidence-based approach (such as public opinion surveys, focus group discussions, and interviews) using PEA as a backbone. It is worth noting that, at least for this sample of energy subsidy reform–related technical assistance activities, these figures represent a marked improvement over the levels reported in Inchauste and POLITICAL ECONOMY ANALYSIS AND COMMUNICATIONS FOR ENERGY SUBSIDY REFORMS 7 Victor (2017, 2), which points out that an “internal stocktaking of analytical reports on energy subsidies by Bank teams over the past 10 years found that only a quarter of them undertake some analysis of the political economy of reforms.”2 The activities reviewed for this assessment indicate that political economy research, public opinion surveys, and stakeholder analyses often helped inform the develop- ment of public communications strategies. The World Bank task teams interviewed for the review credited support for public opinion surveys for strengthening the government counterparts’ and the Bank teams’ understanding of citizen perspectives on and percep- tions of subsidy reforms; the identification of trust issues affecting the government or utilities; assessment of the public’s willingness to pay more for energy services if reliability or quality improved; discovery of information gaps related to the sector; and even assess- ments of citizens’ awareness of social protection mechanisms. The duration of PEA and communications support provided varied across countries and activities. In some settings, PEA or strategic communications support was provided over multiple years through a gradual reform effort. In other cases, the turnaround time was a matter of months. In certain urgent settings, such as macro-fiscal crises requiring rapid and decisive action to tackle the significant fiscal burden from energy subsidies, 2. Although it is not possible to determine whether this sample of ESRF-funded activities is fully representative of the entire range of World Bank analytical reports on energy subsidy reforms, which may be produced under different activities carried out by diverse practice groups, it appears to indicate a positive development. 8 THE WHAT: STOCKTAKING OF PEA AND COMMUNICATIONS ACTIVITIES teams of international and local consultants were able to provide “just-in-time” assistance under stringent timelines. For example, in one country, a team of World Bank staff, interna- tional consultants, and local consultants was able to carry out a PEA and advise the govern- ment on the design of a possible communications strategy within five months’ time. The budget required for the support tended to be correlated with the scope of work, cost of surveys, and wage levels in the country. Therefore, grant sizes varied depending on the scope, country, and activity focus, from fairly small budgets for quick assessments to larger grants for in-depth analyses and strategic communications advice. Some PEAs were conducted by external consultants in cooperation with a local survey team and local consultants with expertise in the country’s energy sector. POLITICAL ECONOMY ANALYSIS AND COMMUNICATIONS FOR ENERGY SUBSIDY REFORMS 9 THREE The How: Activity Design and Implementation Approaches 10 THE HOW: ACTIVITY DESIGN AND IMPLEMENTATION APPROACHES This chapter summarizes the main observations regarding the scope, design, and imple- mentation approaches followed for political economy analysis (PEA) and communications support under the set of technical assistance activities reviewed for this report. Political economy analysis support Overall, energy subsidy reform–related PEAs carried out focused mostly on house- holds and, to a lesser extent, on firms. The majority of PEA-related activities reviewed (29 out of 32) focused on supporting the government to gain a better understanding of the perspectives and reform-related perceptions of households, the private sector, or state- owned energy-intensive corporations. Most of these analyses were intended to be inputs for the development of public communications strategies on energy subsidy reforms that were being contemplated. Two-thirds of all activities involved some level of stakeholder analysis as part of the PEA. The majority of the PEAs reviewed involved evidence-based approaches. These approaches included gathering information through public opinion surveys, focus group discussions, and in-depth interviews, with the objective of helping identify key energy subsidy reform stakeholders, understanding their positions, and assisting in audience segmentation for communications. Specifically, 21 activities involved the setup and devel- opment of large-scale public opinion research efforts. To better understand the perspec- tives and positions of private sector actors, public sector stakeholders, civil society, unions, and bilateral and multilateral agencies, several activities complemented the public opinion surveys with focus group discussions (19 activities), in-depth interviews (24 activities), or both. In-depth interviews were most commonly used, likely because they continue to be feasible even when constraints in the environment make it impossible to conduct a broader- scale public opinion survey. The analyses sometimes involved stakeholder influence-interest matrixes for visual- ization of the assessment and its findings. Stakeholder mapping can enable a broader discussion of stakeholders’ interests and help identify audience segmentation for designing communications strategies, thereby improving the reform owners’ or champions’ under- standing of the political economy context and perspectives. Although some of the PEAs stayed high level and summarized broad stakeholder perspectives and positions, a small group of PEA activities also incorporated detailed problem-driven PEA approaches. This type of PEA focuses on a specific development challenge or reform (e.g., smart meter installation, a change in bill collection infrastructure, or an increase in low-grade gasoline prices) and conducts a deep assessment of governance and institutional challenges, analyzes the influence and interests of stakeholders with regard to the specific reform issue, and reviews foreseeable implementation challenges, previous reform attempts, and so forth.3 This approach can provide greater insights into what mea- sures are the most feasible from an implementation perspective because it zooms in to 3. A problem-driven PEA goes beyond standard sectoral or macro PEAs, which explore how decisions are made in a sector, and go into greater detail on how key stakeholders stand to win or lose from various reform options. POLITICAL ECONOMY ANALYSIS AND COMMUNICATIONS FOR ENERGY SUBSIDY REFORMS 11 understand the particular drivers or inhibitors associated with the specific reform initiative or elements under consideration. In fact, this review found that 17 out of 52 ESMAP-funded activities between 2014 and 2020 included some form of problem-driven PEA that gauged informal modes of decision-making and institutional readiness. Of these, 10 also looked at vested interests in the sector. In the countries where these analyses were carried out, indi- viduals interviewed for this review confirmed that problem-driven PEAs contributed to a better understanding of vested interests, coalitions, and political entry points, and therefore provided useful inputs to the reform design and implementation approach. Communications support Of the activities reviewed, advisory support to government counterparts on commu- nications strategies tended to focus mainly on providing insights about audience segmentation, communications methods, messaging, messengers, and trusted channels of communication. Nearly all strategic communications support activities reviewed for this report included identification of key themes that could be highlighted as part of reform-related messages, messengers (credible spokespeople and third-party advocates), and channels of communication. About half of the communications strategies supported involved a detailed media review. By reviewing past positions of different media outlets and identifying opinions and perceptions about energy subsidies and potential reforms, media reviews can indeed be helpful in ultimately improving the understanding of reporting tendencies to anticipate potential future reactions and the development of approaches to meaningfully engage with media on key reform topics. This review finds that the majority of communications support activities involved strong government counterpart demand and ownership. Out of 33 activities with a communication component, 19 were rated by teams as having very strong government ownership. As an example of good practice approaches, several activities reviewed included the creation of a communication committee to support the delivery and implementation of the communications campaigns. These committees would inform key ministries and other decision-makers about the most important facets of the communications strategy in an effort to ensure stronger awareness, consistency, and alignment on key messages across government agencies involved in the reform process. In the activities reviewed, the commu- nication committees often included not only sector or line ministry counterparts, but also other ministries that would be communicating about the reform in different contexts. The continued presence of an active communication committee offers many advantages as the reform process moves from the technical assistance–supported strategy development stage into the government-led communication implementation stage. Two-thirds of the activities with communications components included support for strengthening government capacity in communications. Some form of capacity-build- ing for key communications staff within the government was included in 20 activities, and 3 included knowledge sharing with local media outlets and journalists. In one country, in addition to a peer-to-peer learning event, the technical assistance activity also supported 12 THE HOW: ACTIVITY DESIGN AND IMPLEMENTATION APPROACHES the government in organizing a three-day communications training workshop for energy utility staff. This review found that these approaches contributed to the active involvement of different agencies across the government in the reform process and in the development and implementation of communications strategies, potentially contributing to their effec- tiveness and impact. Most activities focused on communications strategy development, while the development of communication materials themselves was the responsibility of the government. This approach is reasonable, given that the choice and content of communi- cations outputs and materials should be determined by the government, based on the findings of the PEA and the government’s preferred communications strategy. In eight activities, the ESMAP-funded outputs involved those that conveyed factual information, such as infographics, sample videos, frequently asked questions (FAQ) sheets, and posters produced for use by the government at its discretion. Over the years, the use of gender-focused analyses became more prevalent. However, the technical assistance outputs reviewed did not always make it clear to what extent these findings were subsequently incorporated into the design of the communications cam- paigns. In terms of good practice examples of the use of gender-disaggregated analysis, in one country, the activity supported the development of a five-year gender and citizen engagement work program that outlined specific communication tools and their potential use by the government counterpart. Noteworthy citizen engagement tools included plat- forms for citizen engagement and transparency, grievance redress mechanisms, commu- nity score cards, community-based energy education programs, and annual customer satisfaction surveys.4 Little evidence was available regarding the use and impacts of communications support being built into the design of activities. Formal evaluations of communications support in general were found to be fairly limited. There were a few exceptions, including a good practice example summarized in appendix A (Country A), which comprised a two- phase activity, where work in the second phase included an evaluation of the use of com- munication outputs from the first phase. However, the majority of the technical assistance activities did not appear to explicitly track and report on whether and how the communica- tions strategy was used by government stakeholders upon its completion. Similarly, limited information was available with which to assess whether complaint or grievance mechanism portions of communications activities were used or had any impact. The lack of formal evaluations of the use, usefulness, and impact of communications outputs could be an indication of either limited emphasis on evaluating the impact of communications activities or the use of ad hoc or informal assessments.5 This is an area that can be improved in the future: the use of structured assessments of whether the communications strategy or grievance redress mechanism was used as planned, was useful, or had any impact on the ground are all important factors that can provide worthwhile insights for future activities in that country, or could help inform activities in other countries. 4. Even though use of such citizen engagement tools is a very sound approach in principle, whether they generated impact on the ground was not possible to discern from the information available at the time of writing. 5. That the use, usefulness, and impacts of communications tasks were not reported in activity outputs or completion reporting does not necessarily mean that the monitoring of the impact of communications activities was not carried out by the teams, but rather, that a dedicated output with monitoring of impacts was not available. POLITICAL ECONOMY ANALYSIS AND COMMUNICATIONS FOR ENERGY SUBSIDY REFORMS 13 FOUR The What: Key Findings and Insights from Activities This chapter highlights common themes and findings based on the outputs from the ESRF-funded political economy analysis (PEA) and communications activities. To this end, a qualitative review of outputs in 33 activities was carried out; in addition, activities in six countries were subjected to in-depth assessments, output reviews, and interviews with World Bank task teams. T he discussion that follows attempts to provide a high-level overview of some of the common themes observed across different in-country activities and noteworthy findings from the diverse set of outputs reviewed for this retrospective exercise. In view of the sensitivity involved, insights and good practice lessons are drawn from activity examples without providing specific details on the countries themselves. Appendix A provides a summary of the main approaches, activity scope, and findings from a select set of country activities that were reviewed in greater detail. Several PEAs found small consumers and politically connected vested interests to be among key political stakeholders. Typically, opposition to phasing out energy subsidies tends to come from two main sources: (1) the general public, mainly residential consumers, and smaller, politically unconnected, businesses; and (2) vested interests, comprising large, politically connected or influential businesses, including fossil fuel suppliers. Country- specific PEAs explored for this review identified a diverse set of vested interests with influence over reform design and outcomes. Depending on context, key stakeholders included, among others, fossil fuel suppliers or importers, fuel distributors, public and private transport operators, farmers, energy-intensive industries, unions, the military, utilities, owners of power generation plants, regional governments, and representatives of ethnic groups. One of the most noteworthy and commonly observed findings emerging from vari- ous PEAs was that stakeholders across highly varied contexts were not uniformly or invariably opposed to subsidy reform or tariff increases in electricity, district heat- ing, and other energy services. Rather, several of the PEAs reviewed found that, across countries facing varied challenges, energy subsidy reforms could be more acceptable if the price changes were accompanied by actions that could produce tangible beneficial results. In a significant share of public opinion surveys reviewed, stakeholders highlighted several expected potential benefits that could increase their willingness to accept price increases in different contexts. These benefits included, in particular, improvements in reliability or quality of energy services and the availability of social protection measures that mitigate the impact of subsidy reform on the vulnerable segments of society. In fact, a majority of the opinion surveys carried out under the activities reviewed indicated that households would find energy price increases more acceptable if accompanied by increases in other benefits or special compensation mechanisms. These findings from in-country PEAs are consistent with observations in key studies, such as Beaton et al. (2013); Foster and Rana (2020); Hertog (2017); IMF (2013); Inchauste and Victor (2017); Inchauste, Victor, and Schiffer (2018); Moerenhout (2017a); and Vagliasindi (2012). POLITICAL ECONOMY ANALYSIS AND COMMUNICATIONS FOR ENERGY SUBSIDY REFORMS 15 The likelihood of acceptance of subsidy reform was assessed to have a chance of improving when the reform was accompanied by clear, informative, and trustworthy communications on the purpose of subsidy reform and the scope of the expected outcomes. Several of the PEA outputs reviewed found that the trustworthiness of the individuals delivering the messages was important to stakeholders. Indeed, virtually all evidence-based communications strategies noted that the communicator needs to come across as honest, accessible, and easy to understand so that trust in the authorities engaged in the reform effort can be built, thereby helping to overcome any perceived or real trust deficit toward the broader government. Several opinion surveys carried out found that distrust among stakeholders or toward authorities translated into skepticism about the messaging regarding energy subsidy reforms and the role of the government. This finding is consistent with the literature’s emphasis that trust in government is a key determinant for achievement of energy subsidy reform objectives (Beaton et al. 2013; IMF 2013; Inchauste and Victor 2017; McCulloch, Moerenhout, and Yang 2021; Moerenhout, Vezanis, and Westling 2017; Rentschler and Bazilian 2017). Other key findings and conclusions. Additional takeaways from technical assistance activities with PEA elements are summarized below, including those that can offer useful insights to practitioners in this field. This high-level summary is complemented by appen- dix A, which presents findings and emerging messages from a diverse set of in-country activities that were sampled for this review. 16 THE WHAT: KEY FINDINGS AND INSIGHTS FROM ACTIVITIES • Overall, PEAs were consistent with findings in the wider literature (Foster and Rana 2020; Fritz, Levy, and Ort 2014; Inchauste and Victor 2017; Moerenhout 2022; Skovgaard and van Asselt 2018), which indicate that challenges to reforms tend to be more political than technical in nature, with various stakeholders being able to affect reform imple- mentation or its sustainability. • Individuals interviewed in different PEAs reported feeling excluded from policy debates and expressed lack of trust in both government and utilities or service providers. • A common, often-reported perception was that consumers already considered prices of energy commodities to be high. • In many cases, consumers did not know that they were receiving subsidies, which created the perception that prices and costs increased because of inefficiencies rather than because subsidies were being phased out. • Consumers in different contexts expressed concern about the impact that energy price increases would have on their livelihoods, both directly and via inflation. This concern was a common theme in interviews with vulnerable households in lower income quin- tiles, and with female-headed and single elderly households. • In considering their energy expenditure and how it would be affected by price increases, households reported taking into account not only formal utility services but also the price paid for alternatives, such as wood or biomass for heating, diesel for back-up power generation, or payments to informal service providers, such as electricity provided by small (and likely unlicensed) generators run by neighbors or small busi- nesses in their community. • Concerns about, and potential opposition to, price increases were found to be linked to a perception of wasteful spending of energy revenues by the government or utilities, and to the absence of mitigation measures that could manage the impact on households. • Nonetheless, even with the concerns they cited, interviewed and surveyed consumers did not indicate that they were categorically against price increases in all cases.6 The availability of tangible benefits through different channels appeared to have the poten- tial to change perspectives, as discussed above. 6. Consumer responses to surveys can be different from how they actually react when they receive a higher bill, hence the need to avoid overinterpreting interviews as an input into decision-making and to supplement interviews with other types of assessments of potential reactions to reform and its impacts. POLITICAL ECONOMY ANALYSIS AND COMMUNICATIONS FOR ENERGY SUBSIDY REFORMS 17 FIVE What Worked Well? Noteworthy Approaches 18 WHAT WORKED WELL? NOTEWORTHY APPROACHES This chapter summarizes some of the noteworthy practices that stood out among the PEA and communications outputs reviewed as part of this exercise. This summary is meant to offer practical insights and questions for practitioners and researchers who may wish to explore these topics further. Additionally, step-by-step guidance can be found in relevant literature, including Beaton et al. (2013); Fritz, Levy, and Ort (2014); IMF (2013); Inchauste and Victor (2017); Inchauste, Victor, and Schiffer (2018); and Worley, Pasquier, and Canpolat (2018). A common good practice feature that stood out during this review was strong govern- ment ownership and steady involvement in overseeing the analysis and development of the reform planning and communications campaign. The involvement of key deci- sion-makers and authority figures—in particular, “reform champions” at high levels of authority and bureaucracy—in the development and delivery of the communications cam- paigns was observed to be helpful in signaling strong government ownership of the reforms.7 In a few of the activities reviewed, the prime minister’s or president’s office was directly involved in the communication working committee. Such involvement can streamline com- munications across government and ensure consistency in messaging. When there was no consistency or communication happened in silos, trust in government remained low. The ability to engage the right mix of expertise, combining appropriate technical skills and country knowledge, has a bearing on the quality of communications strate- gies. A common theme among good practice examples was that the support provided involved a communications strategy developed by international communications consul- tants and local experts who worked in close collaboration with the government’s communi- cations team. Activities that produced outputs that were assessed to be strong by the World Bank task teams or government counterparts tended to combine local, in-country expertise with international experience comprising multidisciplinary skills. Factors cited by practitioners as necessary for the design of relevant and timely com- munications strategies included the availability of resources to rapidly mobilize exper- tise and continued frequent engagement. These factors were reported to be essential for enabling the provision of relevant good advice, ensuring useful and continued support for government counterparts, and facilitating timely delivery of a communications strategy that is responsive and useful for the reform effort. In one good practice example, thanks to the availability of resources and expertise accessible to the World Bank task team, a team of international and local experts engaged for the activity were able to move from assignment launch to completion of surveys, focus group discussions, and in-depth interviews in just four months. This experience shows that if the government is highly motivated, and if skills and budgetary resources are available, it is possible for the time between the decision to under- take a PEA and its completion to be short. On the World Bank support side, task teams interviewed noted that early engagement of local consultants and frequent meetings between the World Bank teams and external consultants are essential to maintaining momentum and active engagement with government counterparts. 7. This observation is echoed in the relevant literature, which highlights that the involvement of government figures is also helpful within and outside the government, specifically when there is some level of societal trust in institutions. POLITICAL ECONOMY ANALYSIS AND COMMUNICATIONS FOR ENERGY SUBSIDY REFORMS 19 Good practice cases identified in this review tend to have consistent approaches to the sequencing of activities: PEAs were carried out first, then the PEAs were used to inform the design of the reform measures and the communications strategies. Out of the set of communications support activities, 23 involved some form of PEA. Further, it is important to highlight that knowledge flows in both directions between the two key out- puts. Specifically, in a number of instances, the PEA supported under the technical assis- tance was informed by the work carried out during the development of a communications strategy by the government counterparts in cooperation with the World Bank. A set of specific examples exploring how findings of the PEA and stakeholder analyses informed the design of communications campaigns and messaging is available in appendix B. Overall, country experiences indicate that building PEA early in the design of a subsidy reform engagement can generate valuable information and analyses that can contribute to the development of effective communications strategies and help strengthen the broader reform effort by helping to identify measures to address select political economy risks. A relevant takeaway from the review is that the timing of the PEA work, and its use to answer the right policy questions, can have an important bearing on its utility. Comprehensive PEAs combining multiple methods are essential for understanding the perspectives and influence of different stakeholders. Effectively capturing how different stakeholders view the reform, how they can exert influence over the process, and what alternatives or compromise solutions can prevent reforms from being blocked are important to gaining a full perspective. This goal requires a combination of different approaches and instruments8 that can capture the perceptions, interests, and influence of citizens as consumers, as well as of vested interests. For example, while public opinion surveys may be effective in capturing citizens’ perceptions and preferences, they show only half the story, and offer an incomplete picture of other potential supporters or opponents of reform. Understanding the perspectives of vested interests and key stakeholders with potential influence requires other forms of analysis and more extensive effort, including focus groups and in-depth interviews conducted over several weeks or even months. The level of detail and coverage of the PEA influenced the comprehensiveness and depth of the communications strategy. For instance, in one good practice example in a country with a multiyear reform effort, the communications strategy built on systematic assessments of media coverage of energy prices and reforms. It provided in-depth media analysis, identified points of contact at local news outlets and information on their back- grounds, and drew on efforts to develop specific messaging for local ethnic groups and foreign investors, among others. Moreover, in this particular case, a list of influential leaders with whom knowledge could be shared was drawn up so they could better under- stand the rationale and need for reform and could potentially contribute to advocacy if they were in support of the reform. 8. See Inchauste and Victor (2017), which offers a helpful framework for understanding stakeholders. 20 WHAT WORKED WELL? NOTEWORTHY APPROACHES Strong examples of communications strategies recommended practical, actionable steps and produced usable outputs that supported the effectiveness of communica- tions. Several of the good practice activities reviewed prioritized the translation of certain messages from English to the local language in a way that did not alter the meaning of the messages to be communicated, emphasized the connotations of various terminology in the local language, and recommended accurate diction and phrasing of specific expressions and special concepts. Creation of accessible, practical, and more visual outputs has tended to support the government’s ability to adopt the materials and reach out to diverse audiences. In some cases, communications support activities helped governments identify opportunities for institutional strengthening. In one country, the activity helped develop the first organogram of communication responsibilities within government, which then paved the way for a ministerial order to streamline government communications and data-sharing. This order and the appointment of communications officials was facilitated by the collaboration among the central ministry, local and regional agencies, and the World Bank. It would be worth considering replicating this good practice in future activities, where feasible and where there is demand from the government. POLITICAL ECONOMY ANALYSIS AND COMMUNICATIONS FOR ENERGY SUBSIDY REFORMS 21 SIX What Next: Strengthening PEA and Communications Support 22 WHAT NEXT: STRENGTHENING PEA AND COMMUNICATIONS SUPPORT This chapter identifies potential areas for improvement and new approaches that can be considered under future PEA and communications technical assistance support to govern- ment counterparts. It is important to emphasize that these recommendations are based on a limited qualitative review that focuses on a select set of activities. Nonetheless, these insights can be helpful for practitioners in the field of energy subsidy reform. Specific ideas for further strengthening PEA and communications technical assistance, informed by this selective review, are outlined below. In technical assistance engagements, it is important to complement the resources dedicated to technical and analytical work with a focus on better understanding the political and sectoral context within which reforms are pursued. This review found that complementing detailed technical analytical and advisory work with PEA and commu- nications support allowed the gathering of additional information that could help govern- ments further strengthen reform designs. Balancing the resources and time dedicated to technical analysis with political understanding, realism, and context-specific solutions, including exploring workable strategies, can be useful for developing reforms that are not only technically sound but also implementable and politically sustainable. Where needed, especially in the context of multiyear reform efforts, it would be worthwhile to revisit and update past PEA outputs to ensure their continued rele- vance. Many PEA activities reviewed as part of this assessment were delivered as one-time reports. For select reform efforts, transforming such PEAs into “living documents” by periodically updating them to reflect significant developments and reevaluating stake- holder positions in light of the latest circumstances can enable the continued relevance and usefulness of these documents. Although iterative updates of PEAs, where earlier assessments are revisited and validity of the main findings are confirmed, may not be suitable for all activities, they could be worth considering for multiyear engagements and reform efforts pursued in dynamic environments in which stakeholder perspectives on potential reform options can evolve fairly rapidly. Revisiting a past PEA, and updating it, if necessary, after a rapid review, would be particularly relevant for contexts in which there are known critical political milestones coming up (e.g., scheduled regular elections) or when there are external shocks (e.g., fuel price shocks, macroeconomic crises) that may shift the political economy dynamics, and hence affect the feasibility of the reforms as designed. Where needed, the option for a PEA update can be built into the design of the activities from the outset by including plans for light updates over the course of the broader energy subsidy reform support provided to the government and reflecting these plans in the terms of reference for consultants as needed. The use of problem-driven PEAs could be explored where appropriate. A small set of activities covered under this review had already adopted elements of problem-driven PEAs. Problem-driven PEAs are analyses that focus on a specific development challenge or opportunity and seek to inform specific operations or policy measures that the govern- ment or the supporting team discusses (e.g., smart meter installation, a change in bill collection systems, or an increase in prices for low-grade gasoline). Problem-driven PEAs specifically look at potential winners and losers from and the practical and political POLITICAL ECONOMY ANALYSIS AND COMMUNICATIONS FOR ENERGY SUBSIDY REFORMS 23 feasibility of the implementation of these policies. Problem-driven PEAs can serve a dual purpose. First, they can equip the government and World Bank teams9 with in-depth knowledge of the reform context, including who currently benefits from subsidies and who may potentially oppose or block reform efforts. This enhanced understanding of stake- holder perspectives and potential concerns can help the government strengthen the reform design by incorporating measures to mitigate the most critical challenges. Second, problem-driven PEAs provide governments and their communication specialists with valuable insights necessary to focus the communications and engagement approaches, coalition-building efforts, and targeted messaging that is tailored to the perspectives of key audiences within the country. Going forward, there may be opportunities to further strengthen technical assistance support for subsidy reform by exploring more frequent use of problem-driven PEAs, while recognizing that the decision of whether to conduct them would be highly context-dependent and reserved for the more sensitive and complex engagements. Activity designs can benefit from incorporating, from the start, plans for evaluation of the usefulness and impact of key PEA and communications outputs. Interviews conducted for this review highlighted evaluations as a critical way of assessing whether PEAs and communications support activities achieved their objectives. However, as noted earlier, tracking the impact of communications support does not yet appear to be a com- mon practice across activities. This lack of tracking was not necessarily surprising given that the Energy Sector Management Assistance Program (ESMAP)-funded technical assis- tance activities focus on supporting the development of communications strategies, while implementation is entirely the responsibility of the government. Nonetheless, evaluation of the impact of activity outputs can add significant value for the government, and there are ways of achieving this within the design of a technical assistance activity supporting com- munications strategy development. Where possible, at the activity design stage, the PEA and communications strategy development tasks can include monitoring and evaluation mechanisms as a key output. At activity closing, a brief ex post evaluation can be carried out, paying specific attention to activity outputs and reporting on whether the outputs were useful to the government counterpart and were, in fact, used. Consultants can be requested in the terms of reference to evaluate impacts some time after the completion of the PEA and communications strategy activity, and share this information with the World Bank counterpart. Key questions to be asked in such an evaluation could include whether (1) the PEA assessed political and institutional readiness for reform; (2) the PEA improved the understanding of stakeholder interests and positions; (3) it informed the design of the reform itself, as well as the communications strategy; (4) the PEA was updated over the course of the reform effort if conditions changed significantly; (5) the communications strategy was shared within government; and (6) the strategy was ultimately used. Above all, it is critical to recognize the importance of government ownership. PEAs are useful tools for both the World Bank team and their government counterparts, offering deeper insights into the political intricacies that influence reform processes. While these 9. Feedback from interviewees in the cases that were reviewed in greater depth underscores the value of problem-driven PEAs, but the specific cases were not discussed in this report due to confidentiality and sensitivity constraints. 24 WHAT NEXT: STRENGTHENING PEA AND COMMUNICATIONS SUPPORT analyses facilitate a more nuanced approach to reform strategy, the design of communica- tions strategies primarily support governments in articulating and advancing their reform agenda. The execution of these communications strategies, much like the reforms them- selves, remains a political decision that lies within the exclusive remit of the government. Therefore, the ultimate decision to take the PEA and communications efforts seriously and dedicate the required resources to the implementation of the selected strategy rests with the governments. Building in early assessment of the institutional readiness of government communi- cations capabilities to help identify and address capacity-building needs can contrib- ute to better outcomes. Such an assessment can help the government improve its design and implementation capabilities and ensure the usefulness of the communications outputs for supporting reform implementation. The importance of adequate local understanding, expertise, and capacity in developing communications campaigns cannot be overempha- sized. Up-front institutional readiness assessments can help evaluate existing capacity and communications budget allocations and identify gaps that can be addressed through capacity-building and bringing in external experts to support the government in develop- ment and delivery of the campaign. In this context, technical assistance can be useful to aid government entities in strengthening their own capacity and designing communications campaigns that anticipate and respond to stakeholder concerns. It is worth exploring the feasibility of and options for supporting government agen- cies during the implementation of their communications strategy, as they move from campaign planning to communications rollout and to monitoring and evalua- tion. Governments that request support for the implementation of their communications campaigns can be assisted through the mobilization of supplemental grant resources to augment their implementation capacity for communications, in conjunction with possible recipient-executed World Bank lending operations. Given the importance of understanding whether a communications strategy or approach worked, exploring how to help equip the government entities tasked with implementing the strategy with the right tools to properly monitor the implementation and effectiveness of their efforts would be useful. Making available a set of sample documents and curated knowledge could help strengthen the ability of World Bank teams to support government counterparts. For example, building on the earlier discussion on problem-driven PEAs, the development of practical guidance on approaches to and good practices for problem-driven PEAs, based on country programs, could be useful. Moreover, the availability of a standard set of questions for PEA and communication surveys, customized to a specific country setting, would allow comparisons between countries and across regions. This approach can help distill some patterns of opposition to subsidy reforms and identify what factors enable progress in cases where governments have strong ownership and have taken bold actions. Such elements can also be included in the terms of reference of the PEA and of the communica- tions strategy consultant(s) engaged by task teams. POLITICAL ECONOMY ANALYSIS AND COMMUNICATIONS FOR ENERGY SUBSIDY REFORMS 25 Appendix A Examples of PEA design and findings under ESMAP grants This appendix summarizes approaches and findings of select Energy Sector Management Assistance Program (ESMAP)-funded technical assistance involving PEA work, out of the 33 activities that were reviewed. These PEA and communications activities were selected and are summarized in this appendix to illustrate the different approaches used under the activities reviewed. Given the sensitivity of the bilateral engagements with governments, and the PEA findings, country details have been removed. Nonetheless, to give a sense of the range of countries involved, the table provides the World Bank assigned income classification10 and the net oil product trading status11 of the countries. TABLE A1.1 Examples of PEA design and key findings Country [Income and net Activity design and oil trading status] PEA scope Key findings A Phase I: Before re- Phase I: [LMIC form. POSs, FGDs, IDIs Findings from surveys carried out during the macro-fiscal crisis: Net importer] • About 69 percent of respondents said that the country was “heading in the Phase II: Reform wrong general direction.” moves forward. New • The main problems in the country, ranked from most to least important, were surveys to capture any unemployment, corruption in public sector, low economic output, inflation, pro- changes since phase tection of the poor, government incompetence, political instability, and crime. I; checking on impact • Only 11.4 percent of respondents were aware of reforms in the energy sector, of previous commu- significantly less than the three-quarters of the population that were aware of nications campaigns, the reforms to the pension system. if any. POS on the proposed energy sector reforms under consideration: Phase III: Household • The majority of respondents reported not being prepared for increased utility budget survey on bills to cost recovery, market-based levels as envisaged under the proposed targeted subsidy pro- reform. gram performance • Participants across the country reported not knowing how to receive targeted (planned). support and compensation for tariff increases. • Familiarity with, understanding of, and willingness to pay for energy efficiency and conservation solutions, which can help households cope with energy tariff increases, varies across regions. A significant share of the respondents indicat- ed they would not be willing to borrow for energy efficiency investments. 10. The country income classifications follow the World Bank designations of income groups, namely low-income countries, lower-middle-income countries, upper-middle-income countries, and high-income countries. See here. 11. Following Agnolucci et al. (2023) countries were grouped as importers or exporters based on whether their net trade in crude oil and natural gas liquids since 1991 onward has been positive (exporters) or negative (importers). Positive net trade indicates that the sum of exports over time was larger than the sum of imports. 26 APPENDIX A. EXAMPLES OF PEA DESIGN AND FINDINGS UNDER ESMAP GRANTS Country [Income and net Activity design and oil trading status] PEA scope Key findings FGD findings: • People understood the need for reforms but opposed the tariff increase because of the impact on energy bills and concern over their rising share com- pared with their incomes. • People indicated wanting to know more about how reforms could help improve service quality and accountability. • Government communications were perceived as inconsistent, partial, and unin- formative. Utility bills did not come across as useful sources of information. • People expressed concern about not receiving the available targeted subsidies because of eligibility requirements, length and complexity of the bureaucratic process, small scale of compensation, and existence of other social assistance programs that overshadow energy support programs. • Participants expressed concerns about effectiveness of energy-efficiency programs, including high interest rates charged by banks, programs being per- ceived as benefiting officials, and difficulty obtaining permits, among others. • Phase II survey findings, after the introduction of new, targeted energy subsi- dies, as part of reform: • According to respondents, the top three problems in the energy sector were high energy prices (tariff increase), corruption, and inefficient infrastructure. • The government’s messaging and communications updates on tariff increases effectively reached and were remembered by the majority of respondents. • In general, households surveyed still had fairly limited awareness of the new targeted subsidy program. • Across the country, respondents said that the most useful information for understanding energy tariff reforms would be about how tariffs are formed, followed by information on service improvements that can be expected and how the government is using the funds freed up through the reforms. • Consumers across the country reported being dissatisfied with their utility service providers. Respondents felt that existing prices were already too high and were concerned about new price increases. B POS, FGDs, IDIs National-level survey conducted to assess social and economic impacts and [UMIC perceptions of ongoing power sector reforms. Net importer] Regional-level survey and FGDs, including consumer-level data collection, conduct- ed to understand perspectives on electricity service delivery, consumer behavior, demand, willingness and ability to pay, and trade-offs. Survey results and findings informed the utility’s consumer outreach and engagement strategy. • Rural households that responded to the survey and participants in FGDs reported being overwhelmingly dissatisfied with utility employees’ conduct, voltage fluctuations, electricity interruptions or outages, service quality, prices, bill payment, and electricity infrastructure. • Urban participants reported lower levels of dissatisfaction. • Attitudes toward electricity utilities did not differ by ethnic group.  • Households expressed willingness to adopt new forms of payment. • About three-quarters of electricity consumers in the ethnic minority–dominant region reported not being used to paying for electricity. About 92 percent of ru- ral respondents surveyed in the region reported being unable to pay their bills, while 75 percent noted that the “electricity company does not need the money.” About 55 percent of urban participants indicated that they do not pay their bills or illegally connect to the grid because they do not have enough money. • When local politics became tense, the regional electricity utility focused its outreach efforts at the national level.  POLITICAL ECONOMY ANALYSIS AND COMMUNICATIONS FOR ENERGY SUBSIDY REFORMS 27 Country [Income and net Activity design and oil trading status] PEA scope Key findings C POS, FGDs, IDIs POS and interviews offered several insights: [UMIC • Level of awareness and understanding of electricity subsidies is very weak Net exporter] among all income groups. • Many citizens express belief that energy prices should be low. • Security forces and average-income households could oppose reform. • Poor and unemployed and small businesses might suffer and need mitigation measures (but have less influence). • Select segments of society express strong discontent about the distribution of wealth, which can be linked to lower trust in government. • Reliable electricity is very important, and people understand that excessive demand and electricity theft are the main reasons for outages. • Some respondents expressed lack of confidence that higher prices would con- tribute to more reliable electricity services. Subsequently, they did not express strong willingness to pay more for improved service. • Television is the most commonly used medium for receiving news. Key concerns raised in FGDs were government corruption and incompetence, the unreliability of electricity service, and electricity prices that are too high (right alongside the nonpayment of public salaries). A stakeholder mapping exercise was carried out: Higher interest in reform, Higher interest in reform, lower influence higher influence • Electricity ministry • Well-off • Central bank • Large firms • Planning ministry • Natural resources ministry (no • Independent power producers strong position on reform) • Finance ministry • Prime minister (no strong position) • Political party A Lower interest in reform, Lower interest in reform, lower influence higher influence • Generator owners • Security forces • Manufacturers • Average income • Small and medium enterprises • Political party B • Farmers • Poor households • Unemployed • Media D POS, FGD, IDIs POS and FGD findings: [LMIC • Two-thirds of households think energy prices are already high. Net importer] • More than two-thirds do not know how large energy subsidies are. • About 40 percent of households report having serious or very serious concerns about government ability to manage savings from reform. • When presented with data, many households express view that subsidies are a waste of money. Stakeholder influence matrix developed, as replicated below: Higher impact, lower influence Higher impact, higher influence • Opposition political parties • Petroleum ministry • Cabinet • Finance ministry • Foreign investors • Well-off consumers • Public energy firms • Big business • Media • Military • Unions Lower impact, lower influence Lower impact, higher influence • Civil servants • Farmers • Private minibus operators • Faith-based interest groups • Unemployed • Poor • Small and medium enterprises • Youth 28 APPENDIX A. EXAMPLES OF PEA DESIGN AND FINDINGS UNDER ESMAP GRANTS Country [Income and net Activity design and oil trading status] PEA scope Key findings E POS, IDIs, FGDs Surveys and interviews revealed history of mistrust, unpredictable business [LMIC environment. Net importer] Key findings of the qualitative study, among others: • Electricity is viewed as a basic need in most urban households and businesses. • People are knowledgeable about matters related to electricity in their own communities. • Confidence in electricity bill payments and other fees reaching the government is low. Communications study coverage and findings: • Media analysis undertaken to identify key positions of stakeholders, opposition groups, and main media channels. • Government channels of communication were found to be the most trusted by citizens. • The study pointed to the need for the government to engage more closely with the media. • The study identified experts within various government agencies or other or- ganizations with which the energy line ministry could consult while developing reform. A stakeholder mapping exercise was carried out, mapping influence, perspec- tives, and sentiment toward reform: High influence, negative sentiment High influence, positive sentiment • Media • Foreign investors • Civil society • Union government • Interest groups • State and regional government • Opposition parties • International financial institutions • Business groups • Residential consumers • NGOs Low influence, negative sentiment Low influence, positive sentiment • Off-grid households (with supply) • Off-grid consumers (no supply) • Big business • Oil and gas companies • Off-grid consumers (solar and • Independent power producers others) • Infrastructure investors • Small and medium enterprises • Residential consumers (low con- • Ethnic groups sumption) • Agriculture ministry • Special economic zones F IDIs, FGDs • Impact of reforms is not homogeneous across the population and stakeholders. [LMIC • Many stakeholders have an interest in maintaining the status quo but level of Net exporter] influence on political decision-making differs. • Television is key means of receiving news, followed by radio. A stakeholder mapping exercise was carried out, and a summary impact-influ- ence matrix was developed: Higher impact, lower influence Higher impact, higher influence • Retirees • President • Transport operators • Parliament • Agricultural sector • Small commerce and industry • Rural consumers • Larger commerce and industry • Public administrators • Urban consumers Lower impact, lower influence Lower impact, higher influence • NGOs • Diaspora • Unions • Chambers of commerce • Television, radio, written press • Workers party • Consumer protection association POLITICAL ECONOMY ANALYSIS AND COMMUNICATIONS FOR ENERGY SUBSIDY REFORMS 29 Country [Income and net Activity design and oil trading status] PEA scope Key findings G POS, FGDs, IDIs PEA findings on household perspectives: [UMIC • Apart from poorest quintile, most households understand electricity is subsi- Net exporter] dized. • A small majority understand how such subsidies compare with other areas of social spending. • General frustration with quality of service is prevalent among households. • Most households would be willing to pay for better service. Reliable supply is critical to the vast majority. • A majority of citizens expressed preference for other social spending types over electricity subsidies. • Most citizens reported being skeptical of the government’s ability to provide better service. • Almost all households obtain electricity other than from the grid, which is often very expensive. • Coping mechanisms are fairly limited, especially for poorer people, prompting concerns about price increases. • Concerns and misunderstandings exist related to the role of government in managing resources. Households do recognize they have a responsibility to consume less and pay their bills and that they are not doing that. A stakeholder mapping exercise was carried out, as replicated below: Higher interest in reform, lower Higher interest in reform, higher influence influence • n.a. • n.a. Lower interest in reform, lower Lower interest in reform, higher influence influence • Youth • Generator owners • Poor • Fuel distributors • Media • Big companies • Manufacturers • Wealthy • Unemployed • Civil servants • Farmers H POS, FGDs, IDIs The activity’s surveys focusing on households and small and medium enterprises [LMIC was novel and important because, at the time, the country did not have informa- Net importer] tion related to their perspectives on the energy sector. • Locations with more limited access to centralized services experience low- er-quality service. • Quality of centralized service is an increasing concern, with unplanned outages more frequent and a worsening of service in other cases. • When one or more services are unavailable, consumers will substitute one centralized source for another. • Some low-income households stop using centralized energy services and appli- ances and switch to solid fuels to reduce energy expenses. • Households reported preferring solid fuels that can be collected locally and are cheapest. The largest share of energy expenditure by households goes to firewood. • People complained about poor quality of interactions with service providers. • Some respondents expressed preference for use of prepaid meters, which could provide more transparency for consumers and eliminate the need for inspectors and bill collectors. 30 APPENDIX A. EXAMPLES OF PEA DESIGN AND FINDINGS UNDER ESMAP GRANTS Country [Income and net Activity design and oil trading status] PEA scope Key findings I POS, IDIs Household perspectives: [LMIC • Many respondents pointed to corruption as one of the biggest problems in the Net importer] country and noted that it created pessimism. • Electricity is considered a key service and one of the biggest problems in the country. • Households expressed the view that the government is directly responsible for the current state of electricity supply. • Households viewed that the cost of power generation in the country is very expensive and problematic. • There appeared to be very little trust in the public utility and as a result a pref- erence to pay other distributors and have reliable supply, rather than the same amount to the utility. • There was a high willingness to pay in exchange for extended hours of electrici- ty service, but with regional variation. • Some households expressed concern that public authorities and refugees may not be paying for electricity consumption. • Energy sector line ministers were perceived to be corrupt and poor performers. • Public sector utilities and ministry were considered to have weak performance, whereas private companies were considered to be much more efficient. Political interests: • Ministries were viewed as captured by parties and used for client-patron bene- fits, effectively undermining a national strategy for the power sector. • Corruption in the electricity sector was reported to be a significant concern, including politicians benefiting from fuel supply deals, informal economy creat- ed by private generators, and the use of the public utility for practices outside their mandate. • Participants appeared to question the seriousness of government intentions to work on real sector reform alongside various pressure points: fiscal impact, reputational risk to the political party in power, risk of losing support from international financing, and challenges to governance of the sector. Note: FGD = focus group discussion; IDI = in-depth interview; n.a. = not applicable; NGO = nongovernmental organiza- tion; PEA = political economy analysis; POS = public opinion survey. Income levels: LMIC = lower-middle-income country (US$1,136 to US$4,465); UMIC = upper-middle-income country (US$4,466 to US$13,845). POLITICAL ECONOMY ANALYSIS AND COMMUNICATIONS FOR ENERGY SUBSIDY REFORMS 31 Appendix B Examples of the interaction of PEA and communications components In the first country example, the PEA found that many stakeholders were relatively unaware of the size and opportunity cost of energy subsidies, the inequitable distribution of subsidies across poorer and richer segments of society, and the importance of linking tariff reforms to an improvement in electricity and fuel sectors. These issues especially stood out for the poor and middle class of the country. In view of the findings of the PEA, the communications strategy was designed to directly address these three issues. The communications messages focused on delivering precise estimates of the size of the subsidy and its distribution among different income groups in the country. In view of the weak trust environment, along with the fear of inflationary effects of subsidy reforms, as identified in the PEA, the reform design was strengthened to incorporate mitigation mea- sures to alleviate part of consumers’ financial burden, such as cash-transfer programs, and an overall improvement in system reliability. In addition, the communications strategy focused on sharing information about the various mitigation measures that would be made available by the government, and how they could be accessed. Ultimately, the PEA and communications support contributed to improving policymakers’ understanding of the citizens’ awareness of energy subsidies and their perspectives, and helped clarify the messaging and informed the policy design. In the second country, two main PEAs were administered. The first was an internal mac- ro-level stakeholder assessment, predominately on the political and institutional context. The second was an assessment of public sentiment toward the government, the electricity sector, and potential reforms performed by means of a representative public opinion survey of households and focus group discussions with residential consumers. The survey and focus groups highlighted that the public was burdened by inconsistent service delivery and lacked trust in government, with limited and inconsistent information and communica- tion about the sector, including the existence of electricity subsidies. The first PEA also highlighted the presence of siloes among government agencies involved in the reform, and weak information sharing and coordination of communication. Informed by these analy- ses, the technical assistance activity focused on capacity-building and supporting the establishment of a government-led restructuring of information exchange between gov- ernment agencies, and ultimately the revision of the institutional setup for communica- tions within the government. The communications strategy also focused on addressing consumer knowledge gaps and creating a credible “whole of government” narrative on the need to reform energy subsidies as part of a broader effort to improve service delivery. In the third country, a perception report examined public sentiment toward key electricity sector issues based on an analysis of online consumer discussions, narratives reported by the media, and interviews with private sector representatives. A stakeholder mapping 32 APPENDIX B. EXAMPLES OF THE INTERACTION OF PEA AND COMMUNICATIONS COMPONENTS exercise was carried out, alongside focus group discussions. The perception report pro- vided the line ministry with insights into how media, online, and key stakeholder aware- ness of the ministry’s reform efforts compared with its actual progress and sector performance. The PEA revealed that in the country, government channels were considered the most trusted sources of information on the energy sector, and bills provided based on meters were considered fair, even though there were concerns about tariffs and collec- tions. The PEA indicated consumers’ openness to energy bill increases as long as they would go hand in hand with improvements in quality of supply. On the other hand, the PEA did show that citizens wanted more engagement from government on the electricity sector. In response, the communications strategy developed a number of illustrative examples to show the potential impact of energy reform measures on a variety of individ- ual residential and business consumers. Informed by the findings of the review, the com- munications strategy also recommended the appointment of a communications manager and the integration of the communications function into the normal planning process of the government, to maintain and increase coordinated communications on the sector and reforms. In the fourth country, the technical assistance team was able to draw on recently com- pleted PEA outputs, which included a representative household survey and focus group discussions. Throughout the reform effort, the government carried out repeat surveys and focus group discussions. Communications efforts focused on building trust, promoting understanding of the need for tariff reforms, and clarifying the application process for social assistance. The communications strategy used various media channels, including billboards, digital print, and social media. As the reform effort evolved, repeated PEAs indicated the need to shift the focus of the reform to strengthening the social protection measures. The technical support under the activity supported adjustments to the social protection system, such as improved targeting, expanded outreach, and simplification of the registration process and documentation requirements. As social assistance to house- holds was scaled up, it was accompanied by communications efforts to reach beneficiaries. The communications strategy also included training sessions for journalists and social workers, and consultations with local and regional stakeholders to discuss approaches and messaging. POLITICAL ECONOMY ANALYSIS AND COMMUNICATIONS FOR ENERGY SUBSIDY REFORMS 33 References Agnolucci, P., C. Fischer, D. Heine, M. Montes de Oca Leon, J. Pryor, K. Patroni, and S. Hallegatte. 2023. “Measuring Total Carbon Pricing.” Policy Research Working Paper 10486, World Bank, Washington, DC. 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