ABSTRACT
This chapter describes the major categories of interventions, and discusses their strengths and weaknesses. It considers the role of subsidies in the energy arena, and examines the general case for tax expenditures, regulations, and a variety of other expenditures. A 2006 analysis by the World Trade Organization suggested three main categories of subsidies: direct government expenditures or transfers to producers or consumers, provision of goods and services at no cost or below market price, and government regulations that create transfers between one group and another. Subsidies complicate both the tax code and the process of decision making around the types of projects being incentivized. Household energy subsidies are common throughout the world. Energy sources vital to everyday life—gasoline, coal, fuel oil, charcoal, propane, electricity—priced at market rates often require low-income people to pay a high proportion of their income for them, squeezing out other necessities.
