Template-type: ReDIF-Paper 1.0
Author-Name: Gassmann, Franziska
Author-Email: franziska.gassmann@maastrichtuniversity.nl
Author-Workplace-Name: UNU-MERIT/MGSoG
Title: Switching the lights off: The impact of energy tariff increases on households in 
	 the Kyrgyz Republic 
Abstract: Raising energy prices to cost-recovery tariffs has several implications. 
	 The implicit (quasi-fiscal) subsidization of the energy sector will be 
	 reduced to a large extent. Energy companies will have higher revenues, 
	 and consumers will be faced with a major increase of their energy bills 
	 and potentially high welfare losses. Removing subsidies affects poor 
	 households more as they spend on average a larger share of household 
	 income on energy and because they have fewer options to adjust their 
	 energy consumption. This paper analyses the impact of higher energy 
	 tariffs on households in the Kyrgyz Republic using micro-data from the 
	 Kyrgyz Integrated Household Survey 2009. It aims at answering the 
	 question which households will be most affected by higher energy tariffs 
	 and to what extent mitigation measures, such as lifeline tariffs or 
	 direct cash transfers could soften the impact on poor and vulnerable 
	 households. The analysis focuses on first-order effects and uses benefit 
	 incidence analysis and static micro-simulation to estimate expected 
	 costs and benefits of higher energy prices and the corresponding 
	 mitigation measures. Results suggest that both the type of energy and 
	 the level of connectedness matter. Increasing tariffs for thermal power 
	 used for central heating and hot water mainly affects richer households 
	 in urban areas. Reducing implicit electricity subsidies affects the 
	 whole population due to nearly full country coverage with electricity 
	 connections. Lifeline tariffs for electricity could mitigate the effect 
	 of higher tariffs to a certain extent as long as households have actual 
	 control over their consumption. However, all households would benefit 
	 equally. Direct cash transfers targeted at poor households improve the 
	 targeting performance and lower the costs compared to universal 
	 subsidies.
Classification-JEL: H23, I38, P22
Keywords: energy, subsidies, poverty, social transfers, Kyrgyz Republic
Series: UNU-MERIT Working Papers
Creation-Date: 2012
Number: 2012-066
File-URL: https://unu-merit.nl/publications/wppdf/2012/wp2012-066.pdf
File-Format: application/pdf
File-Size: 275 Kb
Handle: RePEc:unm:unumer:2012066