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Energy Subsidy Reform in the Republic of Moldova

Energy Affordability, Fiscal and Environmental Impacts

image of Energy Subsidy Reform in the Republic of Moldova

This report looks at the fiscal, environmental and social impacts of energy subsidy reform in Moldova with a particular focus on energy affordability. Reduced value added tax (VAT) rate on natural gas consumption and a VAT exemption on electricity and heat consumption by domestic users represent the largest fossil-fuel consumer subsidies in Moldova. Reforming these will imply an increase of the VAT rate, which will lead to an increase of gas, electricity and heat tariffs for households, and will in turn affect household consumption levels, related expenditures and energy affordability. If reform measures are to work, they will need to be accompanied by a carefully-designed social policy to protect poor households.

English Romanian

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Executive summary

Raising energy prices can make good economic and environmental sense but should not lead to increased affordability challenges when policy reform is viewed in its entirety. Using part of the additional revenue generated from higher taxes and putting in place welldesigned social protection measures can help avoid the increased risk of energy affordability and even reduce it, if sufficient revenue is allocated to support vulnerable households.

English Romanian

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