Journal
ENERGY POLICY
Volume 116, Issue -, Pages 410-421Publisher
ELSEVIER SCI LTD
DOI: 10.1016/j.enpol.2018.02.018
Keywords
Electricity subsidy; Electricity demand; Price elasticity; Indonesia; Panel data
Funding
- Australian Research Council [DE160100750]
- Department of Foreign Affairs and Trade through the Australian-German Energy Transition Hub
- Australian Research Council [DE160100750] Funding Source: Australian Research Council
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Indonesia's budget has for years been burdened by large subsidies for electricity consumption. A series of recent reforms has delivered a substantial reduction in these subsidies. In this paper we estimate demand-side effects of these reforms on electricity use. Our analysis utilizes a three-dimensional dataset covering six consumer groups, 16 regions, and 1992-2015. We control for various fixed effects, and use an instrumental variable approach. Our estimates suggest that subsidy reductions since 2013 had induced savings in annual electricity use of around 7% relative to the no-reform counterfactual as of 2015. The phase-out of remaining subsidies has the potential to generate further improvements in the efficiency of electricity use, while freeing up resources for other priorities such as infrastructure spending.
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