Cash Transfers in the Context of Energy Subsidy Reform: Insights from Recent Experience

Energy subsidies, which have a long history of use by governments around the world, have been rising in recent years after a brief period of decline. In 2020, low crude oil prices and weak economic conditions due to the COVID-19 (coronavirus) pandemic resulted in record low energy consumption subsidies. But their 2020 total—US$180 billion—was still significant (IEA 2021). Energy consumption subsidies rebounded as demand recovered; prices rose because of increased energy demand amid tight supply conditions; and various crises followed that required increased support to households and firms. In 2022, total global support for the consumption of fossil fuels exceeded US$1 trillion according to the IEA’s latest estimates (IEA 2023). These growing energy subsidies bring with them risk of further distortions across the economy, environmental damage, and significant drain on fiscal resources.

  Learn more about ESMAP's Energy Subsidy Reform Facility.