The importance of gas as the major source of fuel energy has recently been on the rise, reducing the traditional dependence on coal and coal briquets significantly. Accordingly, how to distribute government incentives among alternative sources of energy becomes an important policy issue. While admitting that the decision will be ultimately swayed by political considerations, this paper suggests that there are several policy criteria which, if properly adopted, would help rationalize energy policymaking. The author argues that in addition to the traditional criteria such as efficiency and equity, the uncertainties of the energy policy system and the consistency and continuity of the policy should be considered as substantive policy criteria as well. Among those, this paper focuses on the equity effects of gas and coal subsidies for various income groups. Evaluating the current distribution of government subsidies fairly equitable and favoring a greater reliance on gas as major source of energy in the future in light of its higher social benefits, this paper warns against the negative equity effects of gas subsidy for the lower income class, particularly when it is combined with the withdrawal or reduction of coal briquet subsidy currently available to them.
Adapted from several sections of the author's Ph.D. dissertation, "Backward Mapping" Analysis of An Urban Energy Policy: A Fuel Subsidy to the Rich?, Harvard University, 1987.