What Have We Learned from Real-World Experiences with Energy Subsidy Reforms and Cash Transfers

Energy subsidies often have significant negative impacts, making their reform a central topic at the nexus of energy, climate, and macro-fiscal reform agendas for many countries.

Governments around the world have deployed cash transfers to support energy subsidy reform efforts over the past few decades, as explored in the ESMAP Technical Paper titled “Cash Transfers in the Context of Energy Subsidy Reform: Insights from Recent Experiences, prepared by colleagues from the World Bank’s Social Protection and Jobs and Energy and Extractives Global Practices. Our two teams collaborated to better understand how cash transfers have been deployed to mitigate impacts of energy subsidy reforms, particularly on the poor, the vulnerable, and those in need.  

Real-world reform experiences reveal that well-designed cash transfers have proven to be highly effective in mitigating reform impacts and supporting implementation of reforms in diverse country settings.  In this context, individual country experiences render interesting insights on program design and implementation. A good example comes from the Dominican Republic, where, drawing on quantitative analyses of potential impacts of energy subsidy reform options under consideration, the government deployed targeted cash transfers to key sectors and households in order to mitigate the potential impacts identified, and gradually integrated these programs into the country’s social protection system over time. Similarly, in the 2014-16 period, in a challenging macrofiscal context, the Government of Ukraine successfully leveraged the country’s existing social assistance system to support households, while undertaking ambitious reforms affecting key energy services.

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