Publication: Energy Subsidy Reform Assessment Framework: Assessing the Readiness of Social Safety Nets to Mitigate the Impact of Reform
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Date
2018-06-30
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Published
2018-06-30
Author(s)
Moubarak, Amr
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Abstract
This note provides guidance to policy makers who are looking to utilize Social Safety Nets (SSNs) to mitigate the welfare impacts of energy subsidy reforms (ESRs) on the poor. The good practice note explains (a) why SSNs are an effective tool in the context of ESR, and (b) different options for rapid scale-up or implementation of SSNs. It introduces a three-stage analytical approach that includes (a) assessing the welfare losses caused by ESR; (b) taking stock of existing SSN and near-SSNs, and modeling expansion options; and (c) assessing the readiness of the existing or planned SSNs for providing protection against the negative consequences of the price shock. The scope of this good practice note is confined to cases where ESRs lead to higher prices paid by energy consumers. As good practice note one outlines, ESRs do not necessarily lead to higher prices, and could even decrease prices paid, such as when producer subsidies in the form of price support paid for by consumers are eliminated, or when consumer price subsidies lead to illegal diversion and out-smuggling, acute fuel shortages, and prices that are even higher than official prices on the black markets. The latter is particularly important: consumers may be paying much higher prices before the reform, having to develop coping mechanisms to deal with energy shortages. ESRs may improve the quality of energy delivery service, reducing energy shortages and thereby improving the welfare of energy consumers. In this context, the note has been prepared for social protection specialists and government officials responsible for social sectors portfolio. It provides an overview and guidance on the use of tools, principles, methods, and practices, in the analysis of social protection issues relevant to ESR. The note has a narrow focus, specifically looking at SSNs as measures that can support the poor during times of ESR.
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“Moubarak, Amr; Yemtsov, Ruslan. 2018. Energy Subsidy Reform Assessment Framework: Assessing the Readiness of Social Safety Nets to Mitigate the Impact of Reform. © World Bank. http://hdl.handle.net/10986/30255 License: CC BY 3.0 IGO.”
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Publication Energy Subsidy Reform Assessment Framework(World Bank, Washington, DC, 2018-06-30)This note comes in three sections. First, the information required for political economy analysis of energy subsidy reforms is presented. Second, a summary is given of the information that can usually be obtained through desk research to provide the context for subsequent interviews and another field research. Third, information that probably requires interviews and field data collection is provided. The ultimate audience of the proposed types of analysis lies with policy reformers themselves and with external development and policy institutions that are seeking to help governments adopt more sustainable reforms. However, the direct audience for this note are those commissioning political economy analysis of energy subsidies, and technocrats, researchers, and advisers to policy makers carrying out the analysis. Often, a team made up of sector experts and political economy experts will provide a greater depth of analysis. Significant attention is devoted here to the origins and operation of existing subsidies since that history conditions what is possible for the adoption and sustainability of future reforms. The main interest and audience for this note is forward-looking, people and institutions who need to understand what is politically possible and how to realign political forces around successful reform. The authors are mindful that this role is perhaps different from other more technocratic roles of agencies and institutions focused on technical analysis and thus they also devote some attention to the processes needed to obtain and manage sensitive information and political insights since mismanagement in that realm can, itself, affect the political prospects for reform and harm the standing of reform agents in the process. 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The Energy Subsidy Reform Assessment Framework (ESRAF) is a comprehensive analytical toolkit and assessment framework for helping countries to achieve politically and socially sustainable reforms. It highlights issues, tools and practices to help identify, analyze and facilitate a comprehensive reform of energy subsidies. It also outlines analytical approaches to diagnose the impacts of energy subsidies, including their effect on energy consumption, emissions, and health. Finally, it explains how to better understand the political context of reform, consult with stakeholders and engage with the public, and it proposes a checklist for rapid diagnostics to aid and guide the reform process.Publication Energy Subsidy Reform Assessment Framework(World Bank, Washington, DC, 2018-06-30)Energy subsidy reform is not a goal in itself, but rather a means of achieving lasting economic and social progress. Communicating with the public and other key stakeholders about the benefits of reform and the drawbacks of existing subsidies helps build support and acceptance. It can also increase trust and understanding of the political decisions that underpin the reform. International experience shows that communicating before, during, and after subsidy reform is essential to ensuring the smooth rollout of a well-planned and executed energy subsidy reform program (GSIand IISD 2013). Some governments undertaking energy subsidy reform programs either ignore communication with stakeholders or take a top-down approach that fails to recognize stakeholder views and concerns. This happens for many reasons, including lack of understanding about the powerful role communication plays in a successful energy subsidy reform program and the absence of capacity within a government to undertake communication activities. 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