Political Economy of Power Sector Subsidies : A Review with Reference to Sub-Saharan Africa

Power sector subsidies in Sub-Saharan Africa are substantial and highly regressive. While subsidies can be quick, easy, and politically expedient to implement, they are equally quick to take root and challenging to remove. Optimal policies that are...

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Bibliographic Details
Main Authors:	Kojima, Masami, Bacon, Robert, Trimble, Chris
Format:	Working Paper
Language:	English en_US
Published:	World Bank Group, Washington, DC 2014
Subjects:	ACCESS TO ELECTRICITY ACCESS TO SERVICES ADMINISTRATIVE CAPACITY ADMINISTRATIVE COSTS ADVERSE EFFECT ADVERSE EFFECTS AFFORDABILITY AGRICULTURAL PRODUCTS AGRICULTURAL SECTOR AGRICULTURE ALTERNATIVE METHODS APPROACH ARREARS AVAILABILITY AVERAGE COSTS BACKUP POWER BALANCE BANKS BUDGETARY SUPPORT BUSINESS DEVELOPMENT BUSINESS OWNERS CAPITAL ACCUMULATION CAPITAL COSTS CAPITAL REQUIREMENTS CASH PAYMENT CASH PAYMENTS CIVIL LIBERTIES CLEAN WATER COAL COLLUSION COMPETITIVE MARKET COMPETITIVENESS CONNECTIVITY CONSUMER PRICE INDEX CONSUMERS CONSUMPTION INCREASES CONTINGENT LIABILITIES CORE BUSINESS CORRUPTION COST OF SUBSIDY COST REDUCTION COSTS OF SUBSIDY CREDIT RATING CRITICAL MASS CROSS-SUBSIDIES CURRENCY DEBT DEBT OBLIGATIONS DEBTS DECISION MAKING DEMAND FOR ELECTRICITY DEMOCRACY DEVELOPING COUNTRIES DIESEL DIESEL FUEL DISTRIBUTION LOSSES DISTRIBUTION NETWORK DISTRIBUTION OF COSTS DOMESTIC GAS EARNINGS ECONOMETRIC ANALYSIS ECONOMIC ACTIVITY ECONOMIC EFFICIENCY ECONOMIC GROWTH ECONOMIC POLICY ECONOMIC REFORM ECONOMIC REFORMS ECONOMIC STRUCTURE ECONOMIES OF SCALE EDUCATIONAL BACKGROUND EFFICIENCY IMPROVEMENT ELASTICITY ELECTRIC UTILITIES ELECTRICITY ELECTRICITY CONSUMPTION ELECTRICITY GENERATION ELECTRICITY PRICES ELECTRICITY SUPPLY ELECTRICITY TARIFFS ELECTRIFICATION EMPLOYEE EMPLOYERS ENERGY MIX EXCHANGE RATE EXCLUSION EXPENDITURE EXTERNAL SHOCKS FACTORS OF PRODUCTION FARMERS FINANCES FINANCIAL COST FINANCIAL CRISES FINANCIAL CRISIS FINANCIAL HEALTH FINANCIAL SUSTAINABILITY FISCAL DEFICITS FIXED COSTS FOOD PRICES FOREIGN BANKS FORMS OF COMPENSATION FUEL FUEL OIL FUEL PRICES FUELS GDP GOOD GOVERNANCE GOVERNMENT BUDGET GOVERNMENT DEBT GOVERNMENT EXPENDITURES GOVERNMENT OWNERSHIP GOVERNMENT POLICIES GROSS DOMESTIC PRODUCT HOUSEHOLD ACCESS HOUSEHOLD INCOME HOUSEHOLDS HUMAN CAPITAL HYDROPOWER INCOME INCOME GROUPS INCOME LEVELS INCREASING RETURNS INCREASING RETURNS TO SCALE INEFFICIENCY INEQUALITY INFLATION INPUT PRICES INSTITUTIONAL ECONOMICS INSTITUTIONAL REFORMS INSURANCE INTEREST PAYMENTS INTEREST RATES INVENTORY JOB CREATION KILOWATT-HOUR LEGITIMACY LOAN LOAN GUARANTEES LOW TARIFFS MARGINAL COST MARGINAL COST PRICING MARGINAL COSTS MARKET ENTRY MARKET PRICES MARKET STRUCTURE MIDDLE-INCOME COUNTRIES MISMANAGEMENT NATURAL GAS NATURAL MONOPOLIES NEW BUSINESS OIL OIL EXPORTERS OIL PRICES OIL PRODUCTS OPERATING COSTS OPTIMIZATION OUTPUT PAYMENT SYSTEM PEAK DEMAND PENSIONS PERFECT INFORMATION PIPELINE POLICY DESIGN POLITICAL ECONOMY POLITICAL POWER POLITICAL RISK POLITICAL SCIENCE POLITICAL SYSTEM POWER POWER CONSUMPTION POWER COSTS POWER GENERATION POWER GENERATION CAPACITY POWER MIX POWER OUTAGES POWER PRICES POWER SECTOR POWER SECTORS POWER SHORTAGES POWER SYSTEM PRICE ELASTICITY PRICE INCREASES PRICE SUBSIDIES PRICE SUBSIDY PRIVATE INVESTMENT PRIVATE INVESTORS PRIVATE SECTOR PRIVATIZATION PUBLIC UTILITIES QUANTITY OF ELECTRICITY RATE OF RETURN REFORM PROGRAM REFORM PROGRAMS REGRESSIVE SUBSIDY REGULATOR REGULATORY AUTHORITY RENEWABLE ENERGY REPUBLIC REPUTATION RESIDENTIAL CONSUMERS RESIDENTIAL DEMAND SAFETY NET SAFETY NETS SAVINGS SMALL BUSINESSES SMALL FARMERS SOCIAL PROTECTION SOCIAL SAFETY NETS SOCIAL WELFARE STATE INTERVENTION SUBSIDIZATION SUPPLY CHAIN TARIFF LEVELS TARIFF STRUCTURE TARIFF STRUCTURES TAX TAX CREDITS THERMAL POWER TRACK RECORD TRADE ASSOCIATIONS TRADE LIBERALIZATION TRADE UNIONS TRADE-OFF TRANSACTION COSTS TRANSFER OF OWNERSHIP TRANSMISSION LINES UNEMPLOYMENT UNIVERSAL ACCESS VILLAGE VOLTAGE VOUCHERS WEALTH
Online Access:	http://documents.worldbank.org/curated/en/2014/07/19804151/political-economy-power-sector-subsidies-review-reference-sub-saharan-africa http://hdl.handle.net/10986/19986

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Summary:	Power sector subsidies in Sub-Saharan Africa are substantial and highly regressive. While subsidies can be quick, easy, and politically expedient to implement, they are equally quick to take root and challenging to remove. Optimal policies that are technically sound and welfare-enhancing over the long run have nevertheless been found difficult to launch and even more challenging to sustain. Of the barriers to reform, those associated with political economy are among the most powerful, yet their analysis is often lacking due consideration in the reform design process. This paper reviews the literature on power subsidies and their reform with emphasis on the political economy of such reform. It examines pricing principles in the power sector and different types of subsides; drivers for subsidies, benefits and costs of subsidy reform, and their distribution; and approaches to political economy analysis, tools available, and methodological issues. The paper draws examples from Sub-Saharan Africa and elsewhere, and presents case studies from the literature.

Political Economy of Power Sector Subsidies : A Review with Reference to Sub-Saharan Africa

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