Taiwan's state-owned oil company CPC Corporation announced this week that fuel prices will remain frozen for the fourth consecutive week. The decision was unsurprising. But unsurprising does not mean sound. As Taiwan's government quietly accumulates one of the most expensive energy subsidy bills in its history, the International Monetary Fund has issued a clear warning to governments worldwide: exit energy subsidies before the fiscal damage becomes irreversible.
Why Is Taiwan Still Freezing Fuel Prices?
CPC has kept gasoline at NT$33.9 per liter and diesel at NT$31 per liter, absorbing NT$2.7 and NT$4.4 per liter respectively out of its own finances. The official rationale is price stability: global oil markets have been volatile since the outbreak of the US-Iran war in late February 2026, when crude prices surged past US$100 per barrel after trading near US$70 the month before. Even with ceasefire negotiations now underway, prices remain above US$90. Keeping Taiwan's pump prices the lowest in Asia, the government argues, shields households from that turbulence.
The logic is not without political appeal. But it comes at a cost that is neither small nor temporary.
What Does the IMF Actually Say About Energy Subsidies?
The IMF's latest Fiscal Monitor report does not mince words. Governments that use subsidies to insulate consumers from energy price shocks are making a fiscal mistake with compounding consequences. Subsidies mask the real increase in energy prices, suppressing the demand adjustment that would otherwise help moderate prices over time. Meanwhile, they impose mounting strain on public finances already weakened by years of elevated interest rates and persistently high energy costs.
The broader fiscal context makes the warning more urgent. Global government debt reached 93.9 percent of GDP last year — nearly two percentage points higher than the year before and already past the threshold that economists associate with a drag on long-term growth. The IMF projects that ratio will hit 100 percent by 2029, a post-war record. Energy subsidies do not merely add to that burden; they convert a temporary price shock into a permanent fiscal liability.
Who Really Benefits When the Government Subsidizes Energy?
This is the question Taiwan's policymakers have been reluctant to answer honestly. Energy subsidies are not a neutral transfer — they are a regressive one.
Corporations consume far more energy than households. Large enterprises consume far more than small ones. Wealthier households consume more than lower-income ones. When the government subsidizes every unit of electricity by NT$1, a semiconductor fabrication plant consuming tens of billions of kilowatt-hours annually captures an incomparably larger benefit than an ordinary family consuming a few thousand. The subsidy flows overwhelmingly to those who need it least, while the cost is distributed across all taxpayers equally.
Price signals are also distorted. When consumers do not feel the true cost of energy, demand does not fall — which keeps upward pressure on global prices higher than it would otherwise be.
How Much Has Taiwan Already Spent on Energy Subsidies?
The Lai Ching-te administration does not need the IMF to warn it about subsidy costs. The evidence is already on its own books.
In April, the Ministry of Economic Affairs briefed the Legislative Yuan's Economics Committee on a recapitalization plan for CPC. The proposal calls for NT$350 billion in capital injections over four years — from 2027 to 2030 — with NT$168.7 billion allocated in the first year alone. CPC is also seeking NT$300 billion in project financing from financial institutions to shore up its cash flow.
The reason for this extraordinary funding requirement is straightforward: CPC has been executing the government's energy price freeze. According to the Ministry, CPC has absorbed NT$612.9 billion in costs since the COVID-19 pandemic, through the Russia-Ukraine war, and into the current US-Iran conflict. The result is NT$79.2 billion in accumulated losses and a debt ratio of 92 percent.
Taiwan's state-owned electricity utility Taipower is in a comparable position. It has already drawn more than NT$400 billion from the public treasury through recapitalization and direct transfers — with further draws still in the pipeline. Combined, the cost of Taiwan's oil and electricity subsidy policies approaches NT$1 trillion (approximately US$30 billion). The final bill will be paid by taxpayers.
Is There a Better Way to Protect Vulnerable Households?
Yes — and the IMF has spelled it out. Targeted, temporary cash transfers to low-income households are a demonstrably superior policy instrument. Unlike blanket subsidies, they do not distort prices, do not disproportionately benefit large energy consumers, and do not hollow out public finances. They deliver support directly to the people who actually need it, at a fraction of the fiscal cost.
Since the US-Iran war began on February 28, CPC has absorbed NT$12.4 billion under the freeze policy alone. No one can predict when the conflict will end or when oil prices will return to pre-war levels. The risk of yet another enormous bill accumulating for taxpayers is not hypothetical — it is already happening.
Taiwan Cannot Afford to Wait Any Longer
Taiwan's government has firsthand, quantified experience of where energy subsidy policies lead. If that experience has not been enough to prompt a policy reassessment, the IMF's warning should be.
The choice is not between protecting people and fiscal discipline. A well-designed cash transfer program can do the former without sacrificing the latter. What it cannot do is continue to funnel the largest share of public money to the largest energy consumers while calling it compassionate governance.
The time to exit fuel subsidies is now — before the next trillion-dollar bill lands on the taxpayer's desk. （Related： Taiwan's Secret Arsenal | Part 2: The Company That Makes Taiwan's Missiles Hit Their Targets ｜ Latest ）
