Fossil Fuel Subsidies in Thailand: Trends, Impacts, and Reforms

Abstract

Heavily dependent on imported energy sources, significant subsidies on fossil fuels present a heavy burden on public finances in Thailand. This study measures the size of fossil fuel subsidies such as tax breaks for diesel and natural gas, market price support for natural gas for vehicles, and free electricity for low-income consumers as well as the potential economic, energy, and environmental impacts of reducing them. With adequate reallocation of subsidy savings, the short-term adverse impacts of subsidy reform are shown to turn positive in the long term as households and industry respond to changing market realities by adjusting energy demand, supply, and production capacity. The study offers policy advice for sustainable energy use to help guide Thailand’s reform strategies.