Georgia
Georgia is a net importer of energy, relying heavily on natural gas imports from Azerbaijan, and imports of oil products and coal from various countries. The country’s domestic energy production centres on hydropower, biomass, and some crude oil.
In terms of its geographical location, Georgia plays an important role as a regional crude oil and natural gas transit country, from which it gains monetary benefits that influence the country’s overall subsidy policies.
The Baku-Supsa pipeline carries crude oil 829 km from Azerbaijan to the Georgian port city of Supsa along the Black Sea coast. The Baku-Tbilisi-Ceyhan pipeline, carrying crude oil to Ceyhan, Türkiye, is twice the length (1 768 km), of which 249 km run through Georgian territory. Additionally, the South Caucasus Pipeline (SCP) pipes Azeri gas to Turkey while the North-South regional gas pipeline network is used to transit Russian gas to Armenia (2.5 bcm in 2021 and 2.6 bcm in 2022).
The state-owned company Georgian Oil and Gas Corporation manages gas import and transit issues as well as represents government interests in production sharing agreements (PSAs) and is involved in developing thermal power generation capacities. There are three main gas distribution companies in Georgia operating distribution networks on a concessional basis: Tbilisi Energy (former KazTransGaz), which provides gas in Tbilisi, SOCAR Georgia gas and Saqorggaz, which provide gas in regions of Georgia beyond Tbilisi, and smaller distribution companies (around 10% market share) serving different locations country-wide. The two main power distribution companies in Georgia are Telasi and EnergoPro. Currently, Inter RAO Group owns 75% of the shares of JSC "Telasi", while approximately 25% of the shares are in the ownership of “Best Energy Group” LLC. EnergoPro is in private ownership. In the retail market of Georgia, a universal service provider for household consumers and small enterprises, and for other categories of consumers ― a supplier of electricity as a public service: "Tbilisi Electricity Supply Company" LLC (Telmiko) in the license area of Telasi JSC; "EP Georgia Supply" JSC in the license area of Energo-Pro Georgia" JSC.
In 2021, 16.6% of the total energy supply (TES) came from domestic hydropower, which accounted for 80.5% of domestic electricity generation. Because of seasonal fluctuations in hydropower, Georgia is a power exporter during the summer months leaving net imports with a share of only 1.6% of the country’s TES.
The Energy and Water Supply Regulatory Commission of Georgia (GNERC) sets electricity and natural gas tariffs. The VAT rate of 18% applies to all energy products and is incorporated in tariffs for end-users. Average prices on gas and electricity are GEL 0.55/m3 (USD 0.22/m3) and GEL 0.22/kWh (USD 0.08/kWh), respectively.
Natural gas is purchased at different prices according to bilateral import and transit agreements. Along the South Caucasus Pipeline, 5% of transited gas may be purchased at USD 74/1 000 m3 (up to 300 million m3) with additional amounts priced at USD 87 per 1 000 m3 (up to 500 million m3). SOCAR social gas is sold at USD 189/1 000 m3 (up to 500 million m3) while SOCAR commercial gas at USD 240/1 000 m3. Prices on oil products, including fuels, are not regulated.
Electricity tariffs for all consumers are also regulated. A stepwise tariff system is applicable for residential consumers while commercial tariffs vary with the installed voltage level. The main supplier of electricity is Enguri HPP (up to 30% of domestic generation) and its comparatively low average cost of generation contributes to the low weighted average electricity price.
The fiscal cost of support measures for fossil fuels in Georgia was estimated at GEL 33.95 million in 2022 (Table 1). Sixty-nine per cent (69%) was directed at end user beneficiaries, as opposed to 31% directed to firms. Support was mainly given out in the form of direct transfers (GEL 23.58 million) accounting for 69% of the total fiscal cost of support measures. Tax expenditures amounted to GEL 10.37 million.
The fiscal cost of support measures for fossil fuels has increased by 58% since 2017. Since last year, tax expenditures have decreased by 9%, from GEL 11.37 million to GEL 10.37 million and direct transfers decreased by 48%, from GEL 146.20 million to GEL 23.58 million. All growth rate percentages above are expressed in terms of nominal national currency amounts.
Table 2 highlights a selection of support measures associated with a large fiscal cost. A description of these measures is provided in Table 3.
Aggregate numbers from the Inventory represent the fiscal cost of support measures for fossil fuels. They should not be interpreted as a level of support for fossil fuels, nor as an indicator of the extent to which the considered policies are favourable or unfavourable to climate mitigation.
The Inventory reports tax expenditures as estimates of revenue foregone due to measures that reduce or postpone tax payments relative to a jurisdiction’s benchmark tax systems to the benefit of fossil fuels producers or users. Tax expenditure estimates can thus increase over time due to either an increase in the offered concession (relative to benchmark tax systems) or an increase in the benchmark itself. Cross-country comparisons of tax expenditures can also be misleading due to differences in countries’ benchmark tax systems.