Research Gateway

In principle, any measure that keeps prices for energy consumers below market levels or for energy producers above market levels or that reduces costs for consumers or producers may be considered a subsidy. This study aims to take a comprehensive look at a little discussed problem that makes policy makers more thoughtful- LPG subsidies. This is a remarkably important issue because the presence of such subsidies would appear to be damaging on two fronts – not only is a market for LPG is being distorted such that too much of the LPG may be consumed, but subsidy on LPG is regressive in nature. On the other side of the coin, this means that there is a potential ‘double dividend’ from the removal of these subsidies. Economies may see an improved allocation of resources, and action to combat increased government cost could be achieved in one fell swoop. In other words, LPG subsidy elimination could be a socio economic mitigation policy that could be achieved at negative cost, and is therefore particularly worthy of investigation. As with all such negative-cost policy options, however, the fact that they have not yet been undertaken fully despite the win-win characteristics suggests that there are hidden costs or some other barrier to their uptake.