Impact of Energy Subsidy Reform on Firms And Mitigation Measures

The core objective of the project is to analyze the impact of energy subsidy reforms on the productivity and competitiveness of firms in specific sectors in Tunisia. The analysis will identify the coping mechanisms that are available to firms and propose mitigation measures the Government of Tunisia could undertake to reduce the financial burden for vulnerable sectors, while supporting their transition to the new price environment in the medium term. The Consultant will discuss the selection criteria with the World Bank team before finalizing the sector selection.

• Energy consumption: the amount of energy (disaggregated by energy type: HFO, gasoline, diesel, LPG, kerosene, natural gas, electricity, etc.) consumed.

• Market and competition: number and size of firms, export orientation, barriers to entry/exit, product/price differentiation.

• Technology: technology and processes used for energy consumption, energy efficiency (output per unit of energy consumed), and potential for improvement.

• Financial and energy indicators: energy intensity (the share of energy cost, direct and indirect, to total variable cost), and profit margin (the amount by which revenue exceeds the cost of sales), to the extent possible, in comparison with international benchmark.

• Impact: the impact of energy price increases on firm performance (productivity, profitability and energy efficiency), in the short and long terms, on output pricing and aggregate outcomes such as output and employment.

• Coping mechanisms: measures adopted by firms during energy price adjustments (pass-through, cost reduction, energy substitution, energy efficiency investments, others); and

• Policies: current support that the sectors receive from the Government.