Social and political opposition to energy pricing reforms

Abstract

ABSTRACT Fossil fuel subsidy reforms (FFSRs) are critical to sustainable development goals. Fuel subsidies sap governments of funds and contribute to environmental degradation. However, progress on their reduction has been mixed due to weak political and social support for higher prices. Energy affordability has recently shot up the agenda, following a period of sustained energy and broader price inflation, contributing to a resurgence of strikes and other expressions of social grievance. Drawing on empirical experiences across a diverse set of countries – including Chile, France, Indonesia, Iran and Ghana – this paper explores factors shaping the societal and political acceptability of FFSRs. It shows that such measures should be better adapted to the unique political, social and economic fabric of each reforming country or locality. It builds on insights from a small literature on political and social factors shaping FFSR outcome, which emphasize greater risks of social resistance in countries with weak institutions, lower income levels and a history of political instability. It finds that a key element for the success of policy reforms in this area is the ability of policy makers to maintain a broader balance among social, political and industrial interests, regardless of the stage of economic and institutional development.