1887

OECD Trade Policy Papers

This series is designed to make available to a wider readership selected trade policy studies prepared for use within the OECD.

NB. No. 1 to No. 139 were released under the previous series title OECD Trade Policy Working Papers.

English

Measuring distortions in international markets: Below-market energy inputs

Government support for industrial firms can come in many different forms and through a range of channels, varying in complexity. A particularly challenging form of support is energy inputs offered to industrial producers at below-market prices. To improve understanding about the scope and scale of such support, this report examines an illustrative sample of 33 companies and their subsidiaries operating in energy-intensive industries, namely aluminium smelting, steelmaking, chemicals (including fertilisers), and cement. Most of the energy subsidies identified appear to concern the provision of natural gas and electricity at below-market rates, resulting in an average subsidy of USD 0.4-1.3 per million British thermal units and USD 0.02-0.03 per kWh, respectively, over the period 2010-20. In some cases, estimates indicate that subsidies are a multiple of firms’ energy costs, suggesting a sizable impact on firms’ profits and operating margins. The results have important policy implications for efforts to better discipline industrial subsidies in the WTO and elsewhere, notably in relation to how to ensure policy transparency in a context where large energy providers tend to be majority owned by governments.

English

Keywords: Trade, Fossil Fuels, Natural gas, Subsidies, Electricity, State enterprises
JEL: F13: International Economics / Trade / Trade Policy; International Trade Organizations; O25: Economic Development, Innovation, Technological Change, and Growth / Development Planning and Policy / Industrial Policy; Q41: Agricultural and Natural Resource Economics; Environmental and Ecological Economics / Energy / Energy: Demand and Supply; Prices; L60: Industrial Organization / Industry Studies: Manufacturing / Industry Studies: Manufacturing: General; L94: Industrial Organization / Industry Studies: Transportation and Utilities / Electric Utilities; H25: Public Economics / Taxation, Subsidies, and Revenue / Business Taxes and Subsidies; F23: International Economics / International Factor Movements and International Business / Multinational Firms; International Business; L52: Industrial Organization / Regulation and Industrial Policy / Industrial Policy; Sectoral Planning Methods
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