UNECE Guidelines
Reforming Energy Pricing and
Subsidies
Charlotte Griffiths
Sustainable Energy Division
UN Economic Commission for Europe
Joint UNEP-UNECE Expert Meeting on Energy Subsidies
Geneva, November 2007
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Joint UNEP-UNECE Expert Meeting on Energy Subsidies
Geneva, November 2007

ECE Energy Series
No 21


Published in 2003
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Guidelines available in
English, French and
Russian
Prepared jointly by the
UNECE Committee on
Environmental Policy
and the Committee on
Sustainable Energy
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Background…

At their annual sessions in 2001, the UNECE
Committees on Sustainable Energy and on
Environmental Policy established a Task Force on
Environment and Energy for the period 2002-2005

Mandate: to develop non-legally binding guidelines for
decision makers on reforming energy prices to
support sustainable energy development.

Driving force - political commitments of UNECE
member States to shift national economies and energy
markets towards a more sustainable path of
development.
Joint UNEP-UNECE Expert Meeting on Energy Subsidies
Geneva, November 2007
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Scope of the Programme of Work
Focus on three key elements:
i. review and assessment of energy pricing in economies in
transition with the aim of elaborating guidelines on energy
pricing for policy makers in time for the May 2003 Kiev
Ministerial Meeting of the Environment for Europe process;
ii. Analysis of energy subsidization in western and eastern
countries of the UNECE with the aim of elaborating guidelines
on the issue; and
iii. Assessment of methodologies for internalizing environmental
costs through the use of fiscal instruments, including
taxation, and measures to promote their use, to be completed
by the end of 2005.
Joint UNEP-UNECE Expert Meeting on Energy Subsidies
Geneva, November 2007
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Key Objectives
Reforming energy prices to achieve the objectives of sustainable
energy development in the UNECE region, including:
 assisting economies in transition in their efforts to raise energy
prices to levels approximating their “economic” value or to
international market levels, in conjunction with measures to
alleviate the full impact of higher energy prices on those least
able to absorb higher prices;
 assisting policy makers to phase out, in a socially responsive
manner, energy subsidies for environmentally damaging sources
of energy; and
 promoting both the development and use of mechanisms to
internalize external costs of energy production and consumption
and promoting the more extensive use of fiscal instruments to
meet environmental objectives.
Joint UNEP-UNECE Expert Meeting on Energy Subsidies
Geneva, November 2007
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Working Methods
 Through a Task Force to which energy and environmental
experts were designated by a number of UNECE
Governments and international organizations.
 Substantive work and consultations were carried out
through use of electronic correspondence.
 Workshop on Enhancing the Environment by Reforming
Energy Prices, hosted by the Czech Ministry of the
Environment in June 2000 – aim to compare approaches
in developed market economies and in countries in
transition to internalizing the environmental costs in
energy prices.
Joint UNEP-UNECE Expert Meeting on Energy Subsidies
Geneva, November 2007
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Output
Non-legally binding guidelines for policy makers that
were endorsed by Ministerial “Environment for Europe”
Conference, Kiev, 2003.
- General guidelines to be used by policy makers when
reforming national energy pricing and subsidy schemes
- Guidelines suggest the best policy options and measures
to alleviate the full impact of higher energy prices on those
least able to absorb them
- Also suggest policy measures and related tools for flexible
energy price adjustments and removal of harmful
subsidies.
Joint UNEP-UNECE Expert Meeting on Energy Subsidies
Geneva, November 2007
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Summary of Reforming Energy Subsidies
Recommendations
Recalling the recommendation of WSSD Plan of Implementation, to
take action to phase out energy subsidies that inhibit sustainable
development; as well as energy-related decisions of the Aarhus
Ministerial Conference “Environment for Europe”(1998), UNECE
Governments are encouraged to:
1. Reform energy subsidies as part of a broader process of
economic and institutional reform aimed at placing more emphasis
on the market, removing trade barriers, improving governance of the
energy sector and promoting sustainable development.
2. Ensure that price signals reflect to the maximum possible extent
the full costs and benefits, including externalities, of supplying and
consuming different forms of energy.
3. Remove any subsidies that fail to achieve demonstrable net
environmental or social benefits.
Joint UNEP-UNECE Expert Meeting on Energy Subsidies
Geneva, November 2007
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Recommendations continued
4. Favour regional development, education & training, health &
social welfare policies over energy subsidies in addressing social
issues.
5. Target subsidies, where they are justified, at clearly defined
groups & technologies, and devise mechanisms that ensure the
benefits of those subsidies go only to those targeted categories.
6. Carry out a thorough and coherent analysis of all the economic,
social and environmental costs and benefits associated with
existing or planned subsidy schemes to ensure that the case for
them is valid. Where it is not possible to assess properly the full
implications of a given subsidy, seek to remove it.
7. Where a subsidy scheme is justified, design it so that it does not
undermine incentives for producers and suppliers to provide a
service efficiently or for consumers to use energy efficiently, and
does not harm the financial health of energy-service providers.
8. Prevent cost of energy-subsidy schemes from becoming a
serious burden on national finances, and abandon any schemes
that involve excessive administration costs.
Joint UNEP-UNECE Expert Meeting on Energy Subsidies
Geneva, November 2007
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Recommendations continued
9.
Ensure the financial costs and channels through which financial
transfers, within subsidy programmes, are made are fully
transparent, and communicate that information to the public.
10. Ensure limited duration & regular review of energy-subsidy
programmes.
11. Implement reforms in a phased manner, where the economic and
social consequences are profound, to soften the financial pain of
those who stand to lose out and give them time to adapt.
12. Consider introducing compensating measures that support poor
household incomes in more direct & effective ways than via
subsidies.
13. Communicate clearly to the general public the overall benefits of
subsidy reform to the economy and to society as a whole.
14. Apply all means for amicable settlement of accounts by nonpaying customers including financial charges & fines. Cutting of
supplies by energy service providers to non-paying poor
households should be applied with care, and under exceptional
circumstances.
Joint UNEP-UNECE Expert Meeting on Energy Subsidies
Geneva, November 2007
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Future …
 Guidelines on Energy Pricing and Subsidies completed
with Ministerial endorsement.
 UNECE is mandated to undertake follow-up work on energy
subsidies – e.g. review of extent to which guidelines have
been adopted.
 Assessment of methodologies for internalizing
environmental costs through the use of fiscal instruments,
including taxation, and measures to promote their use,
however proved more difficult and was not pursued.
 Since 2003 no substantive activities at UNECE.
 Welcome this initiative and opportunity to cooperate with
UNEP and others.
 UNECE can assist in implementing policy agenda.
Joint UNEP-UNECE Expert Meeting on Energy Subsidies
Geneva, November 2007
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