How to protect vulnerable energy consumers is an ongoing challenge in all energy markets. The issue takes on added importance in the context of market reform programs, where reform usually means changes to the pricing of energy.
A vulnerable consumer strategy enables energy sector reform. Targeted measures focused on vulnerable consumers can help ensure the success of energy reforms by providing support to those most in need, especially if the reform comes with higher energy tariffs. This means that energy sector reform is possible and does not have to be delayed based on fears of affordability. There are many policy options to protect vulnerable consumers effectively from price increases.
Subsidies for everyone are hardly a sustainable solution. The existence of universal energy subsidies is expensive to a country’s budget. While energy becomes available to consumers at affordable prices, it also encourages excessive energy consumption reducing incentives for energy efficiency and conservation. Where energy subsidies support fossil fuels, they are damaging to the environment. Moreover, energy subsidies for everyone not only supports those who are in need but also those who already have the capacity to pay, thereby leading to more money spent on subsidies than needed. Targeted support measures are well suited to offset the impact of tariff or market reforms. Such targeted interventions will be less costly and less distortionary to a government’s budget and an economy.
