Ten Most Distortionary Energy Subsidies - Update (long version)

Complex security, environmental, and economic trade-offs remain the norm for the energy sector.   Government intervention is also the norm, and too often involves a torrent of energy plans, white-papers, and legislation.  In an ideal world, government policies should work in tandem with market forces to achieve an adequate energy supply mix that is cleaner and more diverse than what preceded it.  These synergies do not currently exist.  Instead, there are thousands of government energy market interventions in place around the world - many of which act counter to stated energy security, diversification, and environmental protection objectives.  Simply trying to figure out what subsidies are in place, who is receiving them, and how they are altering market behavior can be exceedingly difficult.

The ten distortionary energy subsidies discussed in the attached paper represent policies that, if corrected, would materially realign price signals to more effectively achieve energy market end goals.

A short version of this paper appears in Cutler Cleveland and Christopher Morris, editors, Handbook of Energy, Volume II, ©2014 Elsevier Inc. http://dx.doi.org/10.1016/B978-0-12-417013-1.00051-0.  Reposted with permission. 

The paper reflects data as of April 2012 when the final draft was delivered to the publisher.  Some details of the specific subsidies have changed in the past two years (see related blog post).  In nearly every case, however, the magnitude of the subsidies has grown and fixing them has become even more important.