Lessons from an International Review of Successful and Unsuccessful Consumer Energy Subsidy Reforms

This paper examines the determinants of successful energy subsidy reforms by synthesizing lessons from the literature and elaborating them through an analysis of an original dataset comprising 417 reform attempts and their outcomes. We synthesize six lessons that governments should follow for a successful outcome: (1) preparing a comprehensive strategy, (2) ensuring appropriate timing, (3) communicating effectively, (4) implementing reforms gradually, (5) launching compensatory measures, and (6) moving toward deregulated and depoliticized pricing. Our analysis both validates these lessons and highlights their nuances, showing, for example, that gasoline price hikes above 50% appear to double the occurrence of unsuccessful outcomes. The analysis also provides actionable guidance for policymakers. For example, we show how a failed first attempt makes future reform more challenging, and we discuss how a government can implement partial reversals in response to protests to keep part of the benefits of reform while demonstrating its willingness to compromise. JEL Classification: P18 Energy; Environment; Q41 Energy: Demand and Supply; Prices; Q48 Energy: Government Policy; H23 Taxation and Subsidies: Externalities; Redistributive Effects; Environmental Taxes and Subsidies.