Assessing the impact of electricity subsides on electricity consumption: the case of selected Latin American countries

Abstract

This document evaluates the impact of electricity subsidies on electricity consumption in Brazil, Argentina, Colombia, and Peru. To do this, this paper uses a Regression Discontinuity Design (RDD) to estimate the impact of the social tariff coverage policy on household electricity expenditure. The main results show mixed evidence of the effect of electricity subsidies on electricity expenditure. For instance, eligible households in Brazil experience a decrease in average electricity expenditure compared to non-eligible households. Results for Argentina point to a null effect of the electricity subsidy on household electricity expenditure. In contrast, in Colombia, the subsidy would be related to an increase in average electricity expenditure, which suggests that there might be overconsumption in the eligible group. Finally, in Peru, the subsidy does not show evidence of any impact on electricity expenditure. Understanding the differential impacts in various countries of the Latin American region can help tailor more effective subsidy programs that better target the most vulnerable populations and improve the optimization of resources. This analysis is one of the very first documents that evaluate social tariff programs in the Latin American region using an impact evaluation method.