ABSTRACT
This chapter presents various principal issues surrounding energy subsidies, as well as an introduction on how to analyse the economic, environmental and social impacts of subsidies and their reform. Subsidies come in both direct and indirect forms, such as tax exemption and price controls, or as regulations that may skew the market. Such diversity has led to difficulty in defining their exact nature, but it is generally agreed that subsidies can be any government action that keeps the price below or above what the market level would normally determine. Global estimates of fossil fuel consumption subsidies have been placed at around $230 billion. In understanding subsidies’ impacts, as well as the benefits of reform, it is essential that the economic, environmental and social factors be considered together. Such integrated assessment can therefore high light the trade-offs stemming out of government policy impacts, while also accounting for the overall well-being of both individuals and society. Methodologies to undertake such analysis are introduced with further discussion provided in the Annex.
