Energy subsidies, international aid, and the politics of reform

Energy subsidies, international aid, and the politics of reform

Energy subsidy reform is critical to achieving the Sustainable Development Goals and tackling climate change. This paper sets out the evidence on the scale of subsidies and their impact. It then reviews the actions of donors in encouraging and supporting energy subsidy reforms. McCulloch finds that, outside of analytical work in support of international diplomatic efforts, the donor community has devoted remarkably few resources to supporting developing countries to remove energy subsidies. 

This is despite the fact that energy subsidies exceed all bilateral aid in 59 per cent of recipient countries. The reason for this low level of effort is the political sensitivity of such reforms. The paper then draws on the recent literature on ‘thinking and working politically’ to provide recommendations about how donors might more effectively encourage politically sensitive energy subsidy reform
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