Skip to main content
SpringerLink
Log in

Modeling the Environmental Macrostructural and Social Impacts of Reducing Energy Subsidies (by the Example of Uzbekistan)

  • FOREIGN EXPERIENCE
  • Published:
Studies on Russian Economic Development Aims and scope

Abstract—

Based on the generalization of the world’s existing approaches to modeling the consequences of limiting energy subsidies in relation to Uzbekistan, the necessity of using the input–output method in its various modifications is substantiated. The developed model structure is based on three channels of distribution of the shock to the economy, the employed and the environment from the restriction of energy subsidies: price, investment and structural. Each of them models different effects of restricting energy subsidies: rising energy tariffs and their impact on output and overall inflation rate; assessment of additional budget revenues in comparison with shortfall in tax revenues due to the slowdown in the growth of energy-intensive industries; negative effects on employment and incomes of the population; positive effects for the environment; growth of external debt during the implementation of green investment projects and a number of others. Using the example of Uzbekistan, the article discusses the results of modeling the consequences of the implementation of various scenarios for the reform of energy subsidies at the macro and sectoral levels, the effects on the environment and financial sustainability. At the same time, issues of limiting the negative social consequences of the reform of energy subsidies by introducing energy efficient technologies and renewable energy sources, stimulating final demand, and slowing down the rate of reduction of subsidies were studied.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Fig. 1.
Fig. 2.

Similar content being viewed by others

Notes

  1. The particular urgency of this problem for the republic became apparent in the conditions of the extremely cold winter of 2022–2023, when interruptions in the supply of energy to the population and commodity producers became more frequent. At the same time, the status of Uzbekistan also changed. From a net exporter, it became a net importer of gas and oil. In the medium term, the severity of the problem of energy shortage will only increase against the backdrop of a reduction in gas production, an increase in external debt, a rapid growth in the population of the republic, high business activity, and the unresolved issue of building a nuclear power plant. For more details, see B. Ergashev “On the Energy Crisis in Uzbekistan.” https://podrobno.uz/cat/obchestvo/luchshe-vsegda-gotovitsya-k-khudshemu-variantu-sobytiy-bakhtiyer-ergashev-ob-energeticheskom-krizise/.

  2. Examples of using this approach for various countries of the world can be found in [4] (Malaysia), [5] (Turkey), [6] (Saint Lucia), [7, 8] (China).

  3. CRED, Climate Resilient Economic Development Program.

  4. Using the methods of econometrics or by summarizing the expert judgments of specialists working in the relevant industries.

  5. This is one of the main parameters of the reform of energy subsidies, which should be strictly linked to the growth rate of real incomes of the bulk of the population. Unreasonably high rates of growth in energy prices due to the rapid reduction of subsidies can lead to a social explosion, and their freezing can lead to an increase in the scale of subsidies, conservation of macroeconomic imbalances and an increase in the budget deficit.

  6. For China in 2019, this share was 1.3%, Vietnam 0.6%, Malaysia 7.2%, Kazakhstan 5.3% [22].

  7. https://knoema.ru/atlas/Uzbekistan/topics, as well as [23].

REFERENCES

  1. Energy Charter, An in-depth review of the policy of the Republic of Uzbekistan in the field of energy efficiency. Protocol to the Energy Charter on Energy Efficiency and Related Environmental Aspects of PEEREA, Brussels, 2022.

    Google Scholar 

  2. IMF, Climate Change Dashboard. https://climatedata.imf.org/pages/go-indicators#gp3.

  3. OECD, IEA, Update on recent progress in reform of inefficient fossil-fuel subsidies that encourage wasteful Consumption, Italia, Discussions in the Group of Twenty (G20) in 2021 (under the G20 Italian Presidency). https://www.oecd.org/fossil-fuels/publicationsandfurtherreading/OECD-IEA-G20-Fossil-Fuel-Subsidies-Reform-Update-2021.pdf.

  4. N. Yu., B. M. Yusoff and H. A. Bekhet, “Impacts of energy subsidy reforms on the industrial energy structures in the Malaysian economy: A computable general equilibrium approach,” Int. J. Energy Econ. Policy 6, 88–97 (2016).

  5. S. Acar and A. E. Yeldan, “Environmental impacts of coal subsidies in Turkey: A general equilibrium analysis,” Energy Policy 90, 1–15 (2016). https://doi.org/10.1016/j.enpol.2015.12.003

    Article  Google Scholar 

  6. GGGI, Fossil Fuel Subsidy and Taxation Reform Scenarios Modelling for Saint Lucia. https://gggi.org/report/fossil-fuel-subsidy-and-taxation-reform-scenarios-modelling-for-saint-lucia/.

  7. Zhijie Jia and Boqiang Lin, “CEEEA 2.0 model: A dynamic CGE model for energy-environment-economy analysis with available data and code,” Energy Econ. 112, 106117 (2022). https://doi.org/10.1016/j.eneco.2022.106117

  8. F. Lou, Theory and Application of Chinese Economy-Energy-Environment-Tax Dynamic Computable General Equilibrium Model, 5th ed. (China Social Sciences Press, Beijing, 2015) [in Chinese].

    Google Scholar 

  9. OECD, Methods for the analysis of energy subsidies in the countries of Eastern Europe, the Caucasus and Central Asia. www.oecd.org.

  10. E. Espagne, A. Godin, G. Magacho, A. Mantes, and D. Yilmaz, Developing Countries’ Macroeconomic Exposure to the Low-carbon Transition, Research Papers, No. 220, Agency Française de Développement, 2021.

    Google Scholar 

  11. M. Beccarello and G. Di Foggia, “Economic impact of energy efficiency policies: A scenario analysis,” Int. J. Econ. Fin. 14 (12), 1–11 (2022). https://www.ccsenet.org/journal/index.php/ijef.

    Article  Google Scholar 

  12. ADB, Fossil Fuel Subsidies in Indonesia: Trends, Impacts, and Reforms. https://www.adb.org/sites/default/files/publication/175444/fossil-fuel-subsidies-indonesia.pdf.

  13. S. Vlasov and E. Deryugina, Fiscal multipliers in Russia. Central Bank of the Russian Federation, Series of Reports on Economic Research, No. 28, 2018. https://cbr.ru/Content/Document/File/33264/wp28.pdf

  14. M. Y. Ksenofontov, A. A. Shirov, D. A. Polzikov, and A. A. Yantovskii, “Assesing multiplier effects in the Russian economy: Input-output approach,” Stud. Russ. Econ. Dev. 29, 109–115 (2018). https://doi.org/10.1134/S1075700718020089

    Article  Google Scholar 

  15. B. Porfir’ev, A. Shirov, and A. Kolpakov, “Low-carbon development strategy: Prospects for the Russian economy,” Mir. Ekon. Mezhdunar. Otnosheniya 64 (9), 15–25 (2020).

    Google Scholar 

  16. I. A. Bashmakov, Low-carbon development and economic growth, CENEf-XXI, 2021. https://cenef-xxi.ru/categories/.

  17. A. A. Shirov, “Macrostructural analysis and forecasting in modern conditions of economic development,” Stud. Russ. Econ. Dev. 33, 495–505 (2022). https://doi.org/10.1134/S1075700722050136

    Article  Google Scholar 

  18. GIZ, Supporting Climate Resilient Economic Development in Kazakhstan. Application of the e3.kz model to Analyze the economy-wide Impacts of Climate Change Adaptation, GIZ Global Programme on Policy Advice for Climate Resilient Economic Development, Germany, 2022. https://www.giz.de/en/downloads/giz2022-en-supporting-climate-resilient-economic-development-in-kazakhstan.pdf.

  19. GIZ, Handbook for the e3 Prototype Model in Mongolia, Global Programme on Climate Resilient Economic Development (CRED), Germany, 2023. https://www.giz.de/en/downloads/giz2023-en-handbook-e3-prototype-model.pdf.

  20. S. Chepel’, Possibilities of the Input-Output Method in Assessing the Import Dependence of the National Economy. Yearbook “Russia: Trends and Development Prospects” (Inst. Nauchn. Inf. Obshchestv. Naukam Ross. Akad. Nauk, Moscow, 2022), No. 17, Pt. 1, pp. 558–564 [in Russian].

  21. S. Chepel’, “Investment, technological, and social aspects in modeling the transition to low-carbon development: The case of Uzbekistan,” Stud. Russ. Econ. Dev. 33, 571–581 (2022).

    Article  Google Scholar 

  22. ADB, Economic insights from Input–Output tables for Asia and the Pacific, 2022.

  23. IEA (International Energy Agency), Greenhouse Gas Emissions from Energy (database), 2022. https://www.iea.org/data-and-statistics.

  24. Uzbekistan, GoU (Government of Uzbekistan), Updated Nationally Determined Contribution of the Republic of Uzbekistan, 2021. https://unfccc.int/sites/default/files/NDC/2022-06/Uzbekistan_Updated%-20NDC 2021_RU.pdf.

  25. Sh. Talukdar, The Effect of Inflation on Poverty in Developing Countries: A Panel Data Analysis, Texas Tech University, 2012. https://ttu-ir.tdl.org/bitstream/-handle/2346/46939/TALUKDAR-THESIS.pdf?sequence=1.

Download references

Funding

This study was supported by the UNDP project “Studying the Opportunities and Effects of Reforming Fossil Fuel Subsidies in Uzbekistan” (project no. 00126340/Climate Promise Phase 2, Tashkent, 2022).

Author information

Authors and Affiliations

  1. Institute of Forecasting and Macroeconomic Research, Ministry of Economic Development and Poverty Reduction, 100011, Tashkent, Uzbekistan

    S. V. Chepel

Authors
  1. S. V. Chepel
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to S. V. Chepel.

Ethics declarations

The author declares that he has no conflicts of interest.

Rights and permissions

Reprints and permissions

About this article

Check for updates. Verify currency and authenticity via CrossMark

Cite this article

Chepel, S.V. Modeling the Environmental Macrostructural and Social Impacts of Reducing Energy Subsidies (by the Example of Uzbekistan). Stud. Russ. Econ. Dev. 34, 713–723 (2023). https://doi.org/10.1134/S1075700723050040

Download citation

  • Received:

  • Revised:

  • Accepted:

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1134/S1075700723050040

Keywords:

Search

Navigation