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AbstractEnergy subsidies account for about 7% of Ecuador's yearly public spending, or two thirds of the fiscal deficit. Removing these subsidies would yield clear economic and environmental benefits and help implement climate targets set in the Paris Agreement. However, expected adverse effects on vulnerable households can make reforms politically difficult. To inform policy design, we use household survey data from Ecuador in combination with augmented input-output data to assess the distributional impacts of energy subsidy reform. We find that in absolute terms energy subsidies benefit richer households more than poor ones. Relative to household income, subsidy removal without compensation would be regressive for diesel and LPG, progressive for gasoline...
