According to the estimates of the International Monetary Fund, a 20% increase in natural gas and heating tariffs for households will help reduce implicit subsidies to wealthy households and free almost 0.2% of GDP for targeted social assistance expenditures to the poor and middle class.

The relevant conclusions are contained in an IMF report entitled Ukraine Gas Pricing Policy: Consequences of Tariff Increases. A single measured tariff increase as illustrated by the 20% tariff increase example has little impact on the welfare of the wealthy. Consequently, a credible schedule of tariff increases over the medium term is necessary to motivate lower consumption by the wealthy.

According to the fund, tariff increases will reduce massive overconsumption by lowering household gas and heating demand while incentivizing adoption of energy saving technologies. Over time, industrial energy efficiency would also increase with less illegal siphoning of gas from households to industry.

Source - Interfax.com

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