The IISD Global Subsidies Initiative The Global Subsidies Initiative of the International Institute for Sustainable Development

Similar documents
UNEP IMF GIZ - GSI workshop. Reforming Fossil Fuel Subsidies for an Inclusive Green Economy

Executive Training Program for Young Energy Leaders. Energy Efficiency Governance Why investing in energy efficiency is important?

SOCIAL HOUSING REFORM PROGRAMME Media Qs and As

How To Make A Green Economy A Profitable Business Recipebook

Competition based Industrial Policy. Outline. What is industrial policy? What is industrial policy? Framework for Industrial Policy

Response to the Energy White Paper Issues Paper PREPARED BY EMC ENGINEERING FOR THE AUSTRALIAN GOVERNMENT DEPARTMENT OF INDUSTRY

SPEECH FOR THE PANEL ON BUSINESS CLIMATE AND INVESTMENT OPPORTUNITIES, Support for Ukraine Conference, 28 April 2015

INTRODUCTION TO THE ETHANOL SUPPLEMENT

ARAB REPUBLIC OF EGYPT CONSULTING SERVICES FOR AN ENERGY PRICING STRATEGY

ACCELERATING GREEN ENERGY TOWARDS The Danish Energy Agreement of March 2012

Keisuke Sadamori Director, Energy Markets and Security International Energy Agency Kuala Lumpur, 8 October

Capacity Building in the New Member States and Accession Countries on Further Climate Change Action Post-2012

Energy White Paper at a glance

TAXATION AND AID FOR DOMESTIC RESOURCE MOBILIZATION (D.R.M.) AID: HELPING OR HARMING DOMESTIC RESOURCE MOBILIZATION IN AFRICA

Economic Outlook for Southeast Asia, China and India 2015

Making the economy greener : the role of just transitions

NATIONAL TREASURY STRATEGIC PLAN 2011/14

Groupwork CCS. Bio-Energy with CCS (BECCS) Platzhalter Logo/Schriftzug (Anpassung im Folienmaster: Menü «Ansicht» «Folienmaster»)

AfDB. Reforming Energy Subsidies in Egypt CONTENT. 1 Context. Chief Economist Complex. 1 Context 1. 2 Impact of Energy Subsidies on the Budget 2

Joint report by IEA, OPEC, OECD and World Bank on fossil-fuel and other energy subsidies: An update of the G20 Pittsburgh and Toronto Commitments

1. EXECUTIVE SUMMARY AND KEY RECOMMENDATIONS

Inclusive Development in Myanmar: Learning from Neighbours. Thangavel Palanivel UNDP Regional Bureau for Asia-Pacific

Roadmap for moving to a competitive low carbon economy in 2050

WORLD ENERGY INVESTMENT OUTLOOK 2014 FACTSHEET OVERVIEW

ENERGY MARKET REFORM

CEEweb s position for limiting non-renewable energy use in Europe

AGRICULTURE FOR FOOD AND FOR BIOENEGY: IS IT POSSIBLE?

From Carbon Subsidy to Carbon Tax: India s Green Actions 1

Fossil fuels subsidies in the agenda of the G20

London, 10 November 2015

Evaluation policy and guidelines for evaluations

Joint Economic Forecast Spring German Economy Recovering Long-Term Approach Needed to Economic Policy

Speech at the High-Level Conference on World Food Security

Chapter 1 Secretary s Review

Energy Prices. Presented by: John Heffernan

MINISTRY OF TRADE AND INDUSTRY STATEMENT BY HON. CALLE SCHLETTWEIN, MINISTER OF TRADE AND INDUSTRY,

The Electricity Sector Leads Energy Market Integration in East Asia: Introduction

Effects of the Global Economic Crisis on Health: Ghana's Experience

World Energy Outlook. Dr. Fatih Birol IEA Chief Economist Paris, 27 February 2014

AN ECONOMIC EVALUATION OF DISTRIBUTED ELECTRICITY GENERATION TECHNOLOGIES

Food & Farming. Focus on Market Safety Nets. December Agriculture and Rural Development

Good afternoon, and thanks to the Energy Dialogue for your kind invitation to speak today.

THE UK CLIMATE CHANGE PROGRAMME AND EXAMPLES OF BEST PRACTICE. Gabrielle Edwards United Kingdom

Speech by the Taoiseach, Mr. Enda Kenny T.D. Ireland: Economic Recovery and the EU Presidency Stability, Jobs & Growth

Anne Sophie CORBEAU International Energy Agency GEP AFTP 12Janvier 2012

Recent increases in international oil prices have resulted in substantial

FUEL SUBSIDY POLICY In Indonesia

ENTERPRISE RISK MANAGEMENT POLICY

Case 6: Institutional arrangements of a green or fossil energy mix

Prince Edward Island. Energy Strategy Consultations

International Workshop on Renewable Energy Policies in Developing Countries, November 22-23, 2010 Washington, DC

India s Services Exports

Conclusions. Towards a green economy

Proof Positive. In 2008, British Columbia announced a bold new climate policy: North America s first revenue-neutral tax on carbon pollution.

Equal Rights and Treatment for Roma in Moldova and Ukraine. Manual

NATURAL GAS DEMAND AND SUPPLY Long Term Outlook to 2030

Multi-year Expert Meeting on Transport, Trade Logistics and Trade Facilitation

Global growth rates Macroeconomic indicators CEDIGAZ Reference Scenario

The Global Commission on the Economy and Climate. Major Economies Forum, Paris

ACTION PLAN FOR ENDURING PROSPERITY. A coherent and comprehensive energy policy

Plenary Session One. The New Geography of Energy: Business as Usual or a New Era for Energy Supply and Demand?

In our member surveys, the following themes are repeatedly mentioned as concerns:

7. ASSESSING EXISTING INFORMATION SYSTEMS AND INFORMATION NEEDS: INFORMATION GAP ANALYSIS

Spurring Growth of Renewable Energies in MENA through Private Sector Investment

Framework of the energy taxation: the situation in OECD countries!

Contribution: China s Perspectives. Zou Ji National Center for Climate Change Strategy and International Cooperation (NCSC)

ENCOURAGING A DYNAMIC LIFE INSURANCE INDUSTRY: ECONOMIC BENEFITS AND POLICY ISSUES

Outline. 1. Climate and energy: where do we stand? 2. Why a new framework for 2030? 3. How it works. 4. Main challenges. 5.

NEW NUCLEAR POWER PLANT UNIT IN FINLAND ACCEPTED BY THE FINNISH PARLIAMENT

I DDEDICATION 15O P T M S E SERVICES TO OPTIMISE EVERY PART OF THE OIL, GAS AND CHEMICALS INDUSTRY

New Zealand Energy Statistics: September 2007 quarter Revised 14 January 2008 See attached Erratum

DG ENLARGEMENT SECTOR BUDGET SUPPORT GUIDELINES

Weiqiao Textile Announces its 2015 Interim Results

Fact Sheet on China s energy sector and Danish solutions

Renewable energies in the Middle East and North Africa: Policies to support private investment MENA-OECD Task Force on Energy and Infrastructure

Frequently Asked Questions

LONDON NUSANTARA PLANTATIONS PLC ( London Nusantara or the Company ) Audited Results for the Year Ended 31 December 2014

Financial education Improving financial skills for prosperity

Guide to the Performance Management Framework

How To Know How The Falling Oil Price Affects The Global Economy And Inflation

Summary of Master Thesis for SAEE. Fuelling Renewable Energy Diffusion in non-oecd Countries

QUICK REFERENCE BEst PRaCtICE REgUlatIoN HaNdBooK

Ipsos Global Reputation Centre Point of View. Your Stakeholders and Your Reputation. 2011, Ipsos Public Affairs

CARIBBEAN COMMUNITY SECRETARIAT THIRTY-SECOND MEETING OF THE STANDING COMMITTEE OF. Paramaribo, Suriname 5-7 November November 2007

11th National Convention on Statistics (NCS) EDSA Shangri-La Hotel October 4-5, 2010

THE HON JULIA GILLARD MP DEPUTY PRIME MINISTER Minister for Education Minister for Employment and Workplace Relations Minister for Social Inclusion

There is strong Government. Uganda: performance contracting, budget reporting and budget monitoring SUMMARY

Part B1: Business case developing the business case

FINANCIAL ADVISERS REGULATION: VOLUNTARY AUTHORISATION

Mapping Fossil-Fuel Subsidies: Lessons from Case Studies of China, Germany, Indonesia, and the United States

PETROLEUM SECTOR DEVELOPMENTS IN EGYPT

Working Paper Research Unit Global Issues Stiftung Wissenschaft und Politik German Institute for International and Security Affairs.

Guidance for U.S. Positions on MDBs Engaging with Developing Countries on Coal-Fired Power Generation 1

Ruslan Yemtsov The World Bank

Renewable Electricity and Liberalised Markets REALM. JOULE-III Project JOR3-CT GREECE ACTION PLAN. By ICCS / NTUA K. Delkis

Executive summary. Chapter one: Foreword. Jochen Kreusel

SECTOR ASSESSMENT (SUMMARY): ENERGY. 1. Sector Performance, Problems, and Opportunities

Decarbonisation and the Economy

Vehicle fuel economy standards in the ASEAN: Need for harmonized approach

SIERRA LEONE UPDATES FROM THE INSTANBUL PRIORITY AREAS OF ACTION

Transcription:

The Global Subsidies Initiative of the International Institute for Sustainable Development Fossil-fuel subsidies, the path to reform and the impact on renewable energy

The Global Subsidies Initiative (GSI) 1. Established in 2005 by IISD, the GSI is dedicated to analyzing subsidies and how they impact efforts to achieve sustainable development. 2. The GSI s goal is to encourage individual governments to undertake unilateral reforms on subsidy policy where these would deliver clear economic, environmental and social benefits and to generate a consensus on the need to take international action. 3. The GSI has received project funding from numerous governments, United Nations agencies, and foundations.

The Global Challenge 1. In the World Energy Outlook 2013 the IEA estimated that fossil fuel subsidies reached US $544 billion in 2012. This estimate was made by comparing energy prices to international benchmarks. The estimates cover subsidies to fossil fuels consumed by end-users and subsidies to fossil-fuel inputs to electric power generation, but do not cover subsidies to petrochemical feedstocks. 2. Countries fall into two broad categories. Those that import fossil fuels at international prices and sell domestically below market prices and those that export energy and sell domestically below international reference prices. 3. Despite much debate around the cost of subsidies to renewable energy the IEA estimates that renewable energy subsidies amounted to US$ 101 billion in 2012. Less than one fifth of the subsidy to fossil fuels.

There is widespread agreement that fossil-fuel subsidies need to be reformed. But how?

Fossil-fuel subsidy reform approach There is no one size fits all approach for FFS reform but there are a series of planning stages and common issues. One piece of advice that stands out above all is to be prepared. Some key factors which we will explore in more detail: 1. Internal cooperation 2. Pacing: a gradual approach or a big bang 3. Getting the prices right 4. Managing impacts 5. Building support for reform

Internal Coordination 1. Internal stakeholders are the ministries and agencies within the government structure; 2. It is essential to establish strong coordination across government; 3. There are some challenges in finding a balance between a big tent approach to internal coordination and a top down approach directed from finance ministries.

Administrative bodies for intra-governmental coordination Mechanism Key Features Strengths Weaknesses Cabinet sub-committee Involved all key ministers Ensures political level Needs to be supported by May be led by head of participation consultation and advisory government Decisions unlikely to need higher level of approval support at the bureaucratic level Parliamentary committee Key ministers mobilise coalitions or champions within Can involve non-government members of parliament Usually only relevant once reform proposal near-final parliaments Identify and address concerns of parliament members that could block passage of necessary legislation Taskforce Seconds officers from relevant departments and agencies Dedicated resources from all relevant agencies Time consuming and resource intensive Limited lifespan to develop and implement reform Provides central point for relations with internal and Conflict can arise between taskforce and home May be hosted by a central external stakeholders departments agency Inter-departmental committee All relevant agencies represented Involves all relevant agencies without removing resources May achieve little beyond awareness raising among Meet regularly or ad-hoc from home agencies officials Must feed into decision making process Expert group Experts could be within or outside government but must have backing of lead ministers Creates some distance between political leaders and reform plans Leaders may not take advice if it comes from non-government experts

Malaysia: Subsidy Rationalisation Lab 1. To help develop a roadmap for subsidy reform the Malaysian Government s Performance Management & Delivery Unit (PEMANDU) held a six week subsidy rationalisation lab in 2010 2. 70 experts worked in consultation with cabinet ministers to develop a detailed reform plan 3. During the process a number of innovative actions, including nationwide SMS polling and an open day, were used to gauge public reaction to the proposals. They found that a majority of respondents supported a phase out of subsidies over 3-5 years 4. The final recommendations were presented to the prime minister

Pacing: A gradual approach or a big bang A gradual approach to reform allows time to monitor impacts and adapt strategies accordingly. However, in some cases the scale of the challenge or an opportunity such as falling international prices or political good will following an election can drive reformers towards rapid reforms..

Pacing: A gradual approach or a big bang

Getting the prices right

Getting the prices right Subsidies do not reduce the cost of energy but they do shift the cost from consumers to taxpayers. The only reliable way to remove subsidies in the long term is to use market based pricing mechanisms. Ad-hoc price rises can eliminate subsidies in the short term but as international prices rise subsidies can return. Making the switch from ad-hoc to market based pricing is a key challenge but a number of countries successfully made this transition.

Getting the prices right The Philippines overcame subsidies which built up as the result of an oil price stabilisation fund through the Downstream Oil Deregulation Act in 1998. The act was part of a broader programme of modernisation and coincided with reducing global energy prices during the Asian financial crisis..

Managing impacts Improved economic, social and environmental prosperity is the rationale for fossil-fuel subsidy reform. But within the large scale picture of overall gains there will be unwanted negative consequences including: Disproportionally affected social groups Energy intensive sectors of the economy Costs increases of goods or services which use energy as an input To evaluate the impacts of reform and design mitigation strategies the following process can be followed:

Steps 1. Project the impacts of subsidy reform 2. Identify impacts that need mitigation 3. Identify potential mitigation measures and reassess impacts 4. Prepare chosen mitigation strategy Managing impacts Activities Map out expected impacts of reform. Estimate effects quantitatively and supplement with qualitative analysis. Conduct stakeholder analysis. Identify impacts on the economy, business or households to make reform politically feasible. Distinguish between temporary transitional measures and those which require ongoing measures. Identify measures that could be employed to address unwanted impacts taking into account: i) measures that reduce the impact of reform such as timing and staggering reform for different fuel types and ii) alternative economic and social assistance iii) policies that counteract price increases for selected groups. The impact of reforms should then be reassessed assuming the presence of the proposed mitigation measure Develop the capacity to deliver the mitigation strategy. Depending on the context and the complexity of the policies, this may be a considerable task that takes several years. A two-track strategy may be needed to respond to short term crises, and realise long term reform Subsidy reduction or change in pricing takes place 5. Monitor and adjust Monitor impacts after reform and the performance of mitigation measures r following their introduction. Adjust as necessary.

Managing impacts The impacts of reform can follow simple analyses based on economic databases or use more advance economic models such as CGE or energy sector models. A simple process described by Coady (2006) and World Bank (2003) which is estimated to take two person weeks to complete and aims to quantify the impact of energy price increases on the costs of goods and services which use fuel as an intermediate output. This process was employed in Ghana in 2005 and is routinely used by the IMF.

Managing impacts: PSIA in Ghana The impact analysis showed that that the lowest income quintile would see consumption costs rise by 9.1 percent as a result of the proposed reforms The modelling showed that the largest indirect impact would come from cost increases in agriculture The results were used to test mitigation options: The modelling showed that excluding kerosene from the reforms would reduce the impact to 7 percent Increasing education grants would reduce the impact to 7.1 percent A cash transfer system would reduce the impact to 4 percent. The cost of operating the cash transfer system was estimated to cost just 5.4 percent of the total savings of the reforms

Building support for reform Fossil fuel subsidy reform can have far reaching impacts and requires a whole-of-government approach. Internal coordination is a vital first step. Effective reform plans are founded on a deep understanding of stakeholder perceptions of reform. Consultation that engages with stakeholders through public enquiries, roadshows, discussion groups and works shops is considered to be good practice. Stakeholder views may also be gauged through systematic literature reviews and survey data. To target subsequent communication and mitigation measures importance/influence matrices can be used.

Example of an importance/ influence matrix

Household surveys in Egypt The survey consisted of 20 multiple choice questions designed by IISD- GSI, Sections on: household characteristics knowledge of energy subsidies attitude toward reform impacts information consumption Sample size of about 1,200 households

Communication Communication is an essential part of the reform process. Good communication focusses on clear simple messages tailored to each stakeholder group. Communications may contain both positive and negative messages but overly negative messages may cause the audience to disengage with the issue. Innovative campaigns can raise awareness.

Communications in Indonesia In Indonesia the Ministry for Energy placed banners at most retail fuel outlets that read Regular gasoline is a subsidised fuel- only for the disadvantaged of society- thank you for using unsubsidised gasoline. The message is unlikely to dissuade wealthier motorists from purchasing fuel, but it does raise awareness that subsidised fuel is not an entitlement for all consumers.

India: GSI graphic novel on fossil-fuel Subsidies In January 2014 GSI released Understanding Fossil-Fuel Subsidies in India: Questions and Answers: A guide to fossil-fuel subsidies and how they affect you The aim was to explore to communicate the issues around fossil fuel subsidies in an engaging way to audiences who might not otherwise engage with the debate

The impact of fossil-fuel subsidies on renewable energy 1. Fossil fuel subsidies are particularly distorting on the electricity sector. 2. In the Middle East and North Africa (MENA) region, subsidies are among the highest in the world reach up to 5% of GDP in several countries. Favourable climatic conditions, and reliance on expensive fossil fuel generators operating on diesel and HFO mean that renewable energy is already at cost parity with fossil fuel power generation 3. This advantage which implies that renewable energy would not need the same financial support as in other regions is obscured by fossil fuel subsidies.

Thank you! Download all our publications at: www.iisd.org/gsi rbridle@iisd.org