Energy Subsidies Reform in Jordan

Facing a fiscal crisis, Jordan initiated substantial petroleum subsidy reforms in 2012. The government has also long contemplated how to cut electricity subsidies, which surpass the fiscal burdens imposed by the petroleum subsidies. This paper estimates the impacts of the 2012 petroleum subsidies reform on household welfare and government revenues. It also simulates the distributional and fiscal impacts from ending subsidies in the electricity sector, where the pricing structure is more complex than petroleum prices. The paper looks at the direct and indirect impacts of reform. Moreover, the paper discusses the political economy considerations of reform. While the full removal of petroleum subsidies would have increased poverty, the compensatory cash transfer program the government instituted is estimated to have fully offset the negative impact for the poorer population. The impact of reforms in the electricity sector will depend significantly on the implementation method chosen. A flat increase of tariffs toward cost recovery will put a huge burden on the poorest households. However, a progressive increase in tariffs will generate substantial savings for the government, even with compensatory mechanisms to mitigate the strong negative impact on the vulnerable population. The immediate compensation of the losers from reform appears to be a crucial factor in the successful implementation of reforms in Jordan.

Bibliographic Details

Main Authors:	Jellema, Jon, Atamanov, Aziz, Serajuddin, Umar
Format:	Working Paper biblioteca
Language:	English en_US
Published:	World Bank, Washington, DC 2015-06
Subjects:	GROWTH RATES, RETAIL PRICE, GOVERNMENT EXPENDITURES, HEAVY OIL, PRICE INCREASES, KILOWATT-HOUR, ELECTRICITY TARIFF, INCOME, INTEREST, POWER STATIONS, PRIVATIZATION, GENERATION, EXCHANGE, INCOME GROUP, GDP PER CAPITA, ELECTRICITY SYSTEM, ELASTICITY, PRODUCER PRICES, GASOLINE CONSUMPTION, POLITICAL ECONOMY, GASOLINE, ENERGY PRODUCTS, WORLD DEVELOPMENT INDICATORS, WELFARE, DISTRIBUTION, PRICING, GAS, SUBSIDY, PRICE, INPUTS, DISTRIBUTION OF ELECTRICITY, POWER MIX, INFLATION, ELECTRICITY CONSUMPTION, RETAIL, TRENDS, SAFETY NETS, INTERNATIONAL COOPERATION, OIL PRICES, PETROLEUM, SAVINGS, CURRENCY, OIL, DEMAND ELASTICITY, FOOD PRICE, PRODUCTS, OIL PRODUCTS, OPTIONS, WATER, DEBT, FISCAL CONSOLIDATION, PRODUCER PRICE INCREASE, SOCIAL PROTECTION, POWER COMPANY, PRICE ELASTICITY, PRODUCT, PRICE SUBSIDIES, FUELS, SUBSIDIES, POWER PRODUCERS, GASOLINE PRICE, PRICE CHANGE, EXPENDITURE, PETROLEUM PRICE, POLITICAL UNREST, CONSUMPTION, DATA AVAILABILITY, SOCIAL SAFETY NETS, GOVERNMENT BUDGET, PETROLEUM PRICES, BALANCE, ELECTRIC POWER, PRICE ADJUSTMENTS, FUTURE, MARKET PRICES, POWER, ELECTRICITY, PRODUCER PRICE, GAS SUPPLY, PRICE SUPPORT, DEMAND, ELECTRICITY GENERATION, PRICE CHANGES, EXPENDITURES, CONSUMERS, AGRICULTURE, HEAVY FUEL OIL, INCOMES, PETROLEUM GAS, ELECTRICITY TARIFFS, FUEL PRICES, SALE, SHARES, MARKET, ENERGY PRICES, PRICE INCREASE, PETROLEUM SECTOR, SOLAR POWER, OUTPUT, NATURAL GAS, GDP, GOODS, INTERNATIONAL MARKET, SHARE, ELECTRICITY PRICE, ADVERSE IMPACT, FINANCIAL RISKS, TARIFF, SUPPLY, FUEL, FUEL OIL, GINI COEFFICIENT, AVAILABILITY, COMMUNICATION, COMMODITIES, PETROLEUM PRODUCTS, FOOD PRICES, CONSUMPTION LEVELS, COMMODITY PRICES, DIESEL, KEROSENE, PRICE OF GASOLINE, COMMODITY, PRODUCERS OF PETROLEUM, PRICES, APPROACH, SPREAD, ENERGY, DEVELOPMENT POLICY,
Online Access:	http://documents.worldbank.org/curated/en/2015/06/24649395/energy-subsidies-reform-jordan-welfare-implications-different-scenarios https://hdl.handle.net/10986/22189
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