@article{Durand-Lasserve:206853,
      recid = {206853},
      author = {Durand-Lasserve, Olivier and Campagnolo, Lorenza and  Chateau, Jean and Dellink, Rob},
      title = {Modelling of Distributional Impacts of Energy Subsidy  Reforms: an Illustration with Indonesia},
      address = {2015-07-20},
      number = {824-2016-54683},
      series = {CCSD},
      pages = {56},
      month = {Jul},
      year = {2015},
      abstract = {This report develops an analytical framework that assesses  the macroeconomic, environmental and distributional  consequences of energy subsidy reforms. The framework is  applied to the case of Indonesia to study the consequences  in this country of a gradual phase out of all energy  consumption subsidies between 2012 and 2020. The energy  subsidy estimates used as inputs to this modelling analysis  are those calculated by the International Energy Agency,  using a synthetic indicator known as “price gaps”. The  analysis relies on simulations made with an extended  version of the OECD’s ENV-Linkages model. The phase out of  energy consumption subsidies was simulated under three  stylised redistribution schemes: direct payment on a per  household basis, support to labour incomes, and subsidies  on food products. The modelling results in this report  indicate that if Indonesia were to remove its fossil fuel  and electricity consumption subsidies, it would record real  GDP gains of 0.4% to 0.7% in 2020, according to the  redistribution scheme envisaged. The redistribution through  direct payment on a per household basis performs best in  terms of GDP gains. The aggregate gains for consumers in  terms of welfare are higher, ranging from 0.8% to 1.6% in  2020. Both GDP and welfare gains arise from a more  efficient allocation of resources across sectors resulting  from phasing out energy subsidies. Meanwhile, a  redistribution scheme through food subsidies tends to  create other inefficiencies. The simulations show that the  redistribution scheme ultimately matters in determining the  overall distributional performance of the reform. Cash  transfers, and to a lesser extent food subsidies, can make  the reform more attractive for poorer households and reduce  poverty. Mechanisms that compensate households via payments  proportional to labour income are, on the contrary, more  beneficial to higher income households and increase  poverty. This is because households with informal labour  earnings, which are not eligible for these payments, are  more represented among the poor. The analysis also shows  that phasing out energy subsidies is projected to reduce  Indonesian CO2 emissions from fuel combustion by 10.8% to  12.6% and GHG emissions by 7.9% to 8.3%, in 2020 in the  various scenarios, with respect to the baseline. These  emission reductions exclude emissions from deforestation,  which are large but highly uncertain and for which the  model cannot make reliable projections.},
      url = {http://ageconsearch.umn.edu/record/206853},
      doi = {https://doi.org/10.22004/ag.econ.206853},
}