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Policy Options: Subsidies

 

Table 1. Types of energy subsidies

Government intervention Example
How the subsidy usually works
lowers cost of production raises cost of production lowers price to consumers
Direct financial transfer

Grants to producers

Grants to consumers

Low-interest or preferential loans to producers

x

 

x

x
Preferential tax treatment

Rebates or exemptions on royalties, duties, producer levies and tariffs

Tax credit

Accelerated depreciation allowances on energy-supply equipment

x

x

x

x
Trade restrictions Quotas, technical restrictions and trade embargoes
x
Energy-related services provided directly by government at less then full cost

Direct investment in energy infrastructure

Public research and development

x

x

Regulation of the energy sector

Demand guarantees and mandated deployment rates

Price controls

Market-access restrictions

x

 

 

x

x

x

 

x

Table from Reforming Subsidies, page 10