Knowledge Note

"Sustainable Energy Subsidy Reform in Ukraine."

Since 2014, Energy Sector Management Assistance Program (ESMAP), through its Energy Subsidy Reform Facility, has provided advice and support to the Government of Ukraine in implementing energy tariff and subsidy reforms, as well as associated social protection measures in response to wasteful energy subsidies. As a result, the government increased tariffs in 2015 and 2016 for a combined increase of 470% for residential gas, and 193% for district heating. This helped to improve the financial viability of the gas sector, which made a financial surplus for the first time in 2016. Simultaneously, the government sheltered the poor from price increases by boosting the number of poor beneficiaries under the Housing and Utilities Subsidy program from 1 million to 6.5 million households in early 2017. Other work also included training for journalists to ensure informed coverage of the policy decisions and support to the government to strengthen social assistance mechanisms. The World Bank is now exploring the option of providing monetary subsidies (actual funds instead of price or tax rebates) and refining the Housing and Utilities Subsidy to better target the poor.