Taiwan will end a long-standing government subsidy to raise electricity rates in a bid to conserve energy and reduce carbon emissions, possibly slowing the island's economic recovery, according to AP.
Effective in May, electricity rates will be increased by an average of 35 percent for manufacturers and between 10 to 25 percent for households, with higher rates for heavier users, Economics Minister Shih Yen-hsiang said Thursday.
No price increases will apply to households consuming minimal electricity, he said.
The government already stirred a public outcry last week by raising gasoline prices by 10 percent.
President Ma Ying-jeou has pledged to reverse a decades-long policy using subsidies to keep utility rates low. The main utility firms have run up large debts as the subsidies don't fully cover losses from keeping prices low.
Taiwan, meanwhile, has come under international pressure to cut carbon emissions that many climate scientists believe contribute to global warming. Coal-burning plants generate up to 70 percent of Taiwan's power, with nuclear and hydroelectric plants providing the rest.
Economists say Taiwan's mainstay steel, petrochemical, cement and a few electronics sectors have long stalled investments in energy-saving equipment because of the subsidies.
"The government has moved in the right direction, but the large-scale price adjustments could have a negative impact on the economy in the short-term," said Yang Chia-yen, a researcher with Taiwan Economic Research Institute.
Taiwan's export-driven economy has slowed amid a weak U.S. recovery and Europe's austerity drive.
With the higher utility costs expected to cut consumer spending and corporate profits, Yang said the government may have to lower the 3.9 percent economic growth rate projected for this year.
Government-run Taiwan Power Co. has accumulated losses of 137 billion New Taiwan dollars ($4.6 billion).