Measuring distortions in international markets: Below-market energy inputs

Oecd

No 268, OECD Trade Policy Papers from OECD Publishing

Abstract: Government support for industrial firms can come in many different forms and through a range of channels, varying in complexity. A particularly challenging form of support is energy inputs offered to industrial producers at below-market prices. To improve understanding about the scope and scale of such support, this report examines an illustrative sample of 33 companies and their subsidiaries operating in energy-intensive industries, namely aluminium smelting, steelmaking, chemicals (including fertilisers), and cement. Most of the energy subsidies identified appear to concern the provision of natural gas and electricity at below-market rates, resulting in an average subsidy of USD 0.4-1.3 per million British thermal units and USD 0.02-0.03 per kWh, respectively, over the period 2010-20. In some cases, estimates indicate that subsidies are a multiple of firms’ energy costs, suggesting a sizable impact on firms’ profits and operating margins. The results have important policy implications for efforts to better discipline industrial subsidies in the WTO and elsewhere, notably in relation to how to ensure policy transparency in a context where large energy providers tend to be majority owned by governments.

Keywords: Electricity; Fossil Fuels; Natural gas; State enterprises; Subsidies; Trade (search for similar items in EconPapers)
JEL-codes: F13 F23 H25 L52 L60 L94 O25 Q41 (search for similar items in EconPapers)
Date: 2023-02-15
New Economics Papers: this item is included in nep-ene and nep-int
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Persistent link: https://EconPapers.repec.org/RePEc:oec:traaab:268-en

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