English | Oct. 23, 2017 | ISBN: 1464811040 | 221 Pages | PDF | 4 MB
Central American countries use approximately one percent of their aggregate gross domestic product to subsidize residential electricity consumption. This amount is comparable to what these countries spend on education and social assistance. The pressure that these electricity subsidies exert on government budgets is particularly high when international energy prices rise. Furthermore, electricity subsidies may have negative effects on the environment because of overconsumption of electricity and an increase in greenhouse gas emissions.
Fiscal and Welfare Impacts of Electricity Subsidies in Central America answers key questions regarding residential electricity subsidies in Central America: How do the subsidy mechanisms function in each country? What are their fiscal costs? Are these subsidies good value for the money? How efficient are subsidies in reaching households in need, and what drives this efficiency? What could reforms accomplish in terms of fiscal and welfare outcomes?
Through their analysis, the authors demonstrate that there is considerable scope for improving the efficiency of electricity subsidies in Central America. Indeed, most countries in the region could significantly reduce the fiscal costs of electricity subsidies without imposing significant costs on households, particularly poor households. Given the limited fiscal space in the region, Fiscal and Welfare Impacts of Electricity Subsidies in Central America seeks to provide policy makers with the analytical foundations necessary to assess the costs and benefits of their electricity subsidy mechanisms, and design effective reform strategies that reflect their unique circumstances and policy priorities.