Heat Tariff Reform and Social Impact Mitigation : Recommendations for a Sustainable District Heating Sector in Belarus
The Government of the Republic of Belarus (GoB) plans to increase district heating (DH) tariffs to cost-recovery levels and gradually phase out subsidies, replacing them with social assistance programs. Residential DH tariffs in Belarus are current...
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| Format: | Energy Study |
| Language: | English en_US |
| Published: |
Washington, DC
2014
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| Online Access: | http://documents.worldbank.org/curated/en/2014/06/19890076/heat-tariff-reform-social-impact-mitigation-recommendations-sustainable-district-heating-sector-belarus http://hdl.handle.net/10986/20021 |
| Summary: | The Government of the Republic of
Belarus (GoB) plans to increase district heating (DH)
tariffs to cost-recovery levels and gradually phase out
subsidies, replacing them with social assistance programs.
Residential DH tariffs in Belarus are currently at roughly
10-21 percent of cost-recovery levels. DH subsidies are
highly regressive, add costs to business, and create
significant fiscal risks and macroeconomic vulnerabilities.
The purpose of this report is to analyze the social,
sectoral, and fiscal impacts of the proposed tariff reform,
and to identify and recommend measures to mitigate adverse
impacts of DH tariff increases on the households. The
analysis shows that: 1) the burden of higher DH tariffs will
fall most heavily on low-income groups; 2) the current
system of subsidies is unfair, benefitting wealthy customers
more than the poor; 3) cross-subsidies undermine the
competitiveness of industries in Belarus; and underpriced
residential heat places an increasing fiscal burden on the
GoB and risks macroeconomic instability. The analysis shows
that a negative social impact is manageable if a tariff
increase is accompanied by countervailing measures to
compensate for the loss of purchasing power, in particular
of the poor, through targeted social assistance and energy
efficiency programs. The rest of the report is organized as
follows: Section 1 describes the GoB's plans for the
sector. Section 2 analyzes the principal challenges in the
sector that necessitate tariff reform. Section 3 discusses
tariff reform options and the likely impact of pursuing each
of these options. Section 4 concludes by recommending a
reform action package that includes customer communication
and engagement, social protection measures and investments
in energy efficiency. The appendices contain material
supporting the analysis in each section. |
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