Energy expenses in OECD countries are between 2% and 4% lower than in the New Policies
Scenario, equivalent to a net reduction of about $40 billion. The net increase in OECD
household consumption is...
limited to 0.1%. Similar net deviations are observed in non-OECD
countries, though non-OECD economies are generally more industry-oriented and energy
spending accounts generally for a larger share in consumption. Energy efficiency measures
redirect consumption towards goods and services which embed less energy. Therefore,
the set of policies in the 4-for-2 °C Scenario induces a more significant boost in household
consumption. The services sector is further developed, as economic development proceeds
in these countries. In 2020, household spending on energy goods is cut by almost 4% in
the case of oil products. The electricity bill diminishes by more than 8%, incentivised by the
reform of fossil-fuel subsidies.
The overall increase in household consumption is, to some extent, counterbalanced by
an overall reduction in consumption of goods and services by firms (Figure 2.16). Energy
expenses by firms are reduced in similar proportion to those of households. But demand
by firms for other goods, notably manufactured products, is maintained, though changed
in detail. The resulting net impact on consumption by firms is a 0.2% decrease ($90 billion)
in OECD countries, offsetting the net increase in households. Larger cuts in the energy bills
of non-OECD firms also lead to a net 0.2% drop in consumption in 2020 (-$80 billion).
The assumed multilateral reform of fossil-fuel consumption subsidies leads to more
efficient resource allocation across the entire economy and is thus welfare-enhancing
in countries implementing the reform. This measure benefits Middle Eastern countries
particularly, which results, in combination with other elements of the policy package, in a
slight increase in their GDP.
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