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Working Paper

Energy Subsidies Reform in Jordan : Welfare Implications of Different Scenarios

GROWTH RATES RETAIL PRICE GOVERNMENT EXPENDITURES HEAVY OIL PRICE INCREASES KILOWATT-HOUR ELECTRICITY TARIFF INCOME INTEREST POWER STATIONS PRIVATIZATION GENERATION EXCHANGE INCOME GROUP GDP PER CAPITA ELECTRICITY SYSTEM ELASTICITY PRODUCER PRICES GASOLINE CONSUMPTION POLITICAL ECONOMY GASOLINE ENERGY PRODUCTS WORLD DEVELOPMENT INDICATORS WELFARE DISTRIBUTION PRICING GAS SUBSIDY PRICE INPUTS DISTRIBUTION OF ELECTRICITY POWER MIX INFLATION ELECTRICITY CONSUMPTION RETAIL TRENDS SAFETY NETS INTERNATIONAL COOPERATION OIL PRICES PETROLEUM SAVINGS CURRENCY OIL DEMAND ELASTICITY FOOD PRICE PRODUCTS OIL PRODUCTS OPTIONS WATER DEBT FISCAL CONSOLIDATION PRODUCER PRICE INCREASE SOCIAL PROTECTION POWER COMPANY PRICE ELASTICITY PRODUCT PRICE SUBSIDIES FUELS SUBSIDIES POWER PRODUCERS GASOLINE PRICE PRICE CHANGE EXPENDITURE PETROLEUM PRICE POLITICAL UNREST CONSUMPTION DATA AVAILABILITY SOCIAL SAFETY NETS GOVERNMENT BUDGET PETROLEUM PRICES BALANCE ELECTRIC POWER PRICE ADJUSTMENTS FUTURE MARKET PRICES POWER ELECTRICITY PRODUCER PRICE GAS SUPPLY PRICE SUPPORT DEMAND ELECTRICITY GENERATION PRICE CHANGES EXPENDITURES CONSUMERS AGRICULTURE HEAVY FUEL OIL INCOMES PETROLEUM GAS ELECTRICITY TARIFFS FUEL PRICES SALE SHARES MARKET ENERGY PRICES PRICE INCREASE PETROLEUM SECTOR SOLAR POWER OUTPUT NATURAL GAS GDP GOODS INTERNATIONAL MARKET SHARE ELECTRICITY PRICE ADVERSE IMPACT FINANCIAL RISKS TARIFF SUPPLY FUEL FUEL OIL GINI COEFFICIENT AVAILABILITY COMMUNICATION COMMODITIES PETROLEUM PRODUCTS PRICE INCREASE FOOD PRICES CONSUMPTION LEVELS COMMODITY PRICES DIESEL KEROSENE PRICE OF GASOLINE COMMODITY PRODUCERS OF PETROLEUM PRICES APPROACH SPREAD ENERGY DEVELOPMENT POLICY
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World Bank, Washington, DC
Middle East and North Africa | Jordan
2015-07-16T22:14:13Z | 2015-07-16T22:14:13Z | 2015-06

Facing a fiscal crisis, Jordan initiated substantial petroleum subsidy reforms in 2012. The government has also long contemplated how to cut electricity subsidies, which surpass the fiscal burdens imposed by the petroleum subsidies. This paper estimates the impacts of the 2012 petroleum subsidies reform on household welfare and government revenues. It also simulates the distributional and fiscal impacts from ending subsidies in the electricity sector, where the pricing structure is more complex than petroleum prices. The paper looks at the direct and indirect impacts of reform. Moreover, the paper discusses the political economy considerations of reform. While the full removal of petroleum subsidies would have increased poverty, the compensatory cash transfer program the government instituted is estimated to have fully offset the negative impact for the poorer population. The impact of reforms in the electricity sector will depend significantly on the implementation method chosen. A flat increase of tariffs toward cost recovery will put a huge burden on the poorest households. However, a progressive increase in tariffs will generate substantial savings for the government, even with compensatory mechanisms to mitigate the strong negative impact on the vulnerable population. The immediate compensation of the losers from reform appears to be a crucial factor in the successful implementation of reforms in Jordan.

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