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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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Foreword

This report presents the main findings and conclusions from an analysis of the social, fiscal and environmental consequences of reforming existing major energy subsidy schemes designed to support domestic users in the Republic of Moldova. The major subsidy measures include: i) a reduced value-added tax (VAT) rate on natural gas consumption; ii) VAT exemption on electricity; and iii) VAT exemption on heating. The study was carried out in response to a request addressed by the government of Moldova to the Organisation for Economic Co-operation and Development (OECD) to help conduct an energy affordability analysis.

English Romanian

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