Energy Subsidies and Energy Access in Developing Countries: Does Institutional Quality Matter?

Abstract

Millions of people in developing countries lack access to modern energies and for long, these countries have relied on energy subsidies to scale up their access rate. However, there is no evidence that those energy subsidies contribute to energy poverty reduction. Similarly, while good governance and strong institutions are touted as critical for implementing energy policy and improving access rate, empirical evidence of their impact remains very scanty. This study assesses the impact of energy subsidies and institutional quality on access to electricity in selected developing countries. Result from the Praise-Winston regression revealed that energy subsidies as a policy tool for achieving universal electrification do not hold in the selected developing countries. We also found that energy subsidies accompanied by a strong governance mechanism can help developing countries scale up their electricity access rate. We recommend practical ways to help developing countries achieve universal access to modern energy solution.