Energy subsidies and poverty: The case of fossil fuel subsidies in Burkina Faso

peer reviewedBurkina Faso has long relied on energy subsidies to facilitate the access of the population to energy products. However, there is no evidence that they contribute to monetary nor energy poverty reduction. This paper aims to assess the effectiveness of fossil fuel subsidies in alleviating monetary and energy poverty in Burkina Faso, focusing on Liquefied Petroleum Gas (LPG) and liquid fuel subsidies. It then evaluates the impact of shifting expenditure from energy subsidies towards universal cash transfer to the poor. The distributional impact of subsidies on households is estimated using the price-gap approach, computing the difference between the reference price and the end-user price across the income distribution. Unlike many price-gap analyses, our price-gap estimate takes into account regional disparities in energy pricing. The analysis reveals that energy subsidies are not pro-poor. Rather, (i) end-user prices of LPG and liquid fuel are not aligned with monetary poverty, (ii) subsidies have a near zero impact on energy and monetary poverty, as those at the bottom income distribution barely benefit from the subsidies, (iii) there is a geographical dimension to the regressiveness of subsidies, as the reform impacts wealthier regions only. Alternative energy policies under the form of a cash transfer targeting the poor maximize redistribution while being budget-neutral.1. No poverty7. Affordable and clean energ