Rentschler, Jun Erik; (2018) The Economics and Political Economy of Fossil Fuel Subsidy Reforms. Doctoral thesis (Ph.D), UCL (University College London).

Abstract

There is a strong international consensus that fossil fuel subsidies (FFS) are detrimental to sustainable development – including the economic, social, and environmental dimensions of sustainability. Yet, despite strong drivers, the overall progress in reforming FFS has been limited. Various failed FFS reform attempts have demonstrated the complex economic and political challenges that must be understood and addressed. This thesis provides a systematic account of the factors that policy makers must consider in order to design and implement effective reforms. It recognises that the rationale for FFS reforms is determined within a complex – and sometimes conflicting – context of fiscal, macroeconomic, political, environmental, and social factors. By considering FFS reforms from these different perspectives, this thesis provides a comprehensive analytical assessment which yields crucial insights for the design of reforms. Specifically, this thesis provides analytical estimates of the impacts of FFS reforms on poverty levels, household consumption, welfare, competitiveness, and macroeconomic performance. It finds that consumption shocks incurred by poor households can be substantial, though cash transfers can provide effective compensation and social protection. It also shows that firms tend to be able to absorb energy price changes into profit margins, and respond by adjusting their long-term energy mix. At the macro-level, it shows that illicit activities (including tax evasion and smuggling) can play a crucial role in determining the welfare costs of FFS reform. The thesis also argues that removing FFS alone may not yield the efficiency gains and environmental benefits that policy makers envisage: Market distortions create barriers for economic agents to adjust their technology and behaviour in response to increasing fossil fuel prices. Overall, this thesis shows that FFS reforms are not only about removing subsidies, but also require an integrated strategy featuring carefully designed and sequenced complementary policy measures. These are summarised in the final chapter, which distils the key insights and provides a policy blueprint for designing effective FFS reforms.

Download activity - last month

Export as JSONXMLCSV

Download activity - last 12 months

Export as JSONCSVXML

Downloads by country - last 12 months

Export as XMLCSVJSON

Archive Staff Only

View Item