Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/110095
Authors: 
Commander, Simon
Nikoloski, Zlatko
Vagliasindi, Maria
Year of Publication: 
2015
Series/Report no.: 
IZA Discussion Papers 8865
Abstract: 
It is widely accepted that the costs of under-pricing energy are large, whether in advanced or developing countries. This paper explores how large these costs can be by focussing on the size of the external effects that energy subsidies in particular generate in two important sectors – transport and agriculture – in two MENA countries, Egypt (transport) and Yemen (agriculture). Our focus is mainly on the costs associated with congestion and pollution as well the impact of under-priced energy for depletion of scarce water resources including through crop selection. Quantifying the size of external effects in developing countries has received relatively little analytical attention, although there is a significant body of literature for the advanced world. By building on earlier research, as well as employing the UN ForFITS model we are able to provide indicative estimates of the external costs of energy subsidies, as manifested in congestion and pollution. Our estimates using simulations indicate that these costs could be materially reduced by elimination or reduction of energy subsidies. We are also able to describe the impact of energy subsidies on water consumption in a region where water resources are particularly limited. As such, our findings provide further evidence of the adverse and significant consequences of subsidising energy.
Subjects: 
energy subsidies
pollution
congestion
health effects of energy subsidies
JEL: 
O13
R41
Q41
Q53
I15
Document Type: 
Working Paper

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