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.

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Moldova's energy prices and energy affordability

This chapter looks at energy prices for electricity, natural gas and heating in Moldova and analyses how affordable it is for households to consume energy. To define energy affordability, average annual energy costs are compared to average annual household income. To provide a better sense of where Moldova stands in relation to other countries, energy affordability is reviewed in a selected number of countries of the European Union (EU), South East Europe, EU Eastern Partnership and the Central Asia region.

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