Coal Production Subsidies Elimination in Ukraine: A CGE Analysis

Abstract

Despite intensive development and implementation of government programs and sector-specific energy policies together with consideration of subsidies elimination as a strategic coal industry priority, governmental grants volumes for this economic activity are growing from year to year. While in 2003 Government cost covering support for coal industry equaled to 0,9 bn UAH, in 2013 Ukrainian Government transferred over 13,3 bn UAH, which is a crippling burden for National Budget. And although coal subsidies elimination process can be considered as a highly complicated and painful, due to resulting social issues, current economic situation even more escalates its necessity. In this paper a computable general equilibrium (CGE) model is applied to study the consequences and economic effects of coal subsidies elimination in Ukraine.

Keywords: Coal production subsidies, reform, Ukraine, CGE model, GTAP

JEL Classification: D58, Q43, Q48