On the Welfare Effect of Retail Electricity Subsidy in Vietnam

This study examines the consumer welfare effects of subsidy schemes in Vietnam’s residential electricity market based on two approaches: cash transfer and quantity–based subsidy. The study finds that, in order to attain more equal distribution across households, the reform should remove all the subsidized blocks and allow to reflect the full marginal cost. Moreover, the price structure should be changed in both marginal price and the intervals. To mitigate the impact of the proposed quantity–based subsidy, the government should improve the cash transfer by reducing the extortion and targeting more efficiently, especially to poor households who live in rented houses