Fuel subsidies consumed a whopping $4.7 trillion worldwide in 2015 and are projected to remain large in the near future. Their adverse effects are well known—excessive consumption, adverse environmental consequences, higher inequality, and reduced fiscal capacity for critical expenditures such as health and education. What is less well known is how to address the burden of higher energy prices when these subsidies are eliminated. This issue has become particularly critical today when the world is facing a post-COVID-19 spike in energy costs that is worrying governments and populations alike. Affordable energy during winter is a critical issue for many countries—since the alternative leads to excessive mortality and poverty. That is why the experience of Ukraine which eliminated energy subsidies and replaced them with targeted social assistance is so pertinent to the rest of the world.
Government assistance when household energy bills are high: Lessons from Ukraine (brookings.edu)
