Based on this structure, both low-volume consumers—households consuming below 200 kWh per month—and high-volume consumers face an increasing marginal cost from usage. Highvolume consumers pay more than low-volume users for the first 200 kWh, and face increasing fees as their consumption rises. In this respect, the tariff structure is progressive: those consuming more pay higher marginal costs per kWh consumed. However, the pace at which marginal tariffs increase is not linear. If we take 50 kWh increments in consumption, moving from a consumption level of 50 kWh to 100 kWh, the price of the second 50 kWh is 44% higher than for the first tranche (from 75 to 108 millimes TND) among low-volume consumers. For those consumers moving toward the highest block of the second tier, that is, moving from 301– 500 kWh to the 501 plus kWh block, the residential tariff increase is 25% or 70 millimes TND. In short, non-linear features (in terms of marginal prices per additional consumption) are combined across different segments of the two-tier system, making the system far from progressive in its entirety.

The pro-poor nature of the system depends on the concentration of consumers who are considered poor in the lower price blocks of each tier. In this light, the system falls short in benefiting the less well-off population: the concentration of poor consumers—specifically those in the bottom quintile of per capita household consumption—in the lifeline block is only 48% (appendix 2). The share of consumers in the lifeline block rapidly declines for subsequent quintiles of the distribution. In turn, the concentration of consumers from the richest quintile ranges from 35 to 60% of all users in the high-volume consumption tier. Consumers from the poorest quintile are hardly represented in the high-volume tier: only 3 to 6% of consumers belong to the poorest quintile. In other words, the poor represent a minimal proportion of consumers of the higher-volume tier, but, more surprisingly, they are not the vast majority of beneficiaries of the lifeline price rates either.

The prices of other energy sources are not subject to differentiated price segments. The prices of gasoline, LPG, and diesel do not vary across consumption levels. Thus, the market price of gasoline is TND 1.67 per liter; the price of 0.2 diesel (containing 0.2 percent of sulfur) is TND 1.25 per liter; and a 13 kilogram cylinder of LPG costs TND 7.4 (or TND 0.57 per kg).<sup>4</sup> As indicated already for the case of electricity, the pro-poor measure of the distribution of those energy subsidies is determined by both the price structure and the extent to which these energy products are consumed by the poor. Yet, the price structure is not progressive in marginal terms, because there is no price increase as consumption increases. In absolute terms, higher-volume consumers benefit from a higher public subsidy, making those subsidies not pro-poor.

# **3.2. Estimating Energy Subsidies**

Most energy sources are publicly subsidized in Tunisia, but to different extents.<sup>5</sup> Based on the observed final—market—prices, price structures, international prices (of imported sources) and

> 4 This type of cylinder is typically used by households. Larger cylinders of 25–35 kg are most frequently consumed in the hospitality/tourism industry.

> 5 From a public finance perspective, the latest data available for both residential and nonresidential consumers in 2013 indicate that some 51% of total energy subsidies go to finance electricity subsidies; 23% to diesel; 15% to LPG; 6% to gasoline; 5% to crude oil; and 1% to kerosene (World Bank 2013).

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