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Jyoti Prasad Painuly

Energy Subsidies - perspectives and reform prospects Joint UNEP and UNECE Expert Meeting on Energy Subsidies 15-16 November 2007 International Environment House I Châtelaine-Geneva, Switzerland. Jyoti Prasad Painuly. Energy Subsidies – Eliminate (can/ should it be?) or reform?.

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Jyoti Prasad Painuly

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  1. Energy Subsidies - perspectives and reform prospectsJoint UNEP and UNECE Expert Meeting on Energy Subsidies15-16 November 2007International Environment House IChâtelaine-Geneva, Switzerland Jyoti Prasad Painuly

  2. Energy Subsidies – Eliminate (can/ should it be?) or reform? • Developing country- India • Prime Minister concerned at rising fuel subsidy8 Nov 2007 • Oil, food and fertilizer subsidy more than US$ 25 billion in 2007 • Question from PM to the Planning Commission; • "reflect what these mean for our development options and what development options these subsidies are shutting out". • “Does it mean fewer schools, fewer hospitals, fewer scholarships, lower public investment in agriculture and poor infrastructure?" • “it is important to restructure subsidies so that only the needy and the poor benefit from them and all leakages are stopped.”

  3. Subsidies; Eliminate or reform? Where we are; a snapshot • Recently in focus: Energy, transport, fisheries and agriculture • Primarily due to Global Environmental Concerns and Trade related issues • Studies on Environmentally Harmful Subsidies, Perverse Subsidies etc. • Economic efficiency argument • Eliminate all for optimization of resource usage • + internalize external costs (eg. in fossil fuels) • Environmental efficiency argument • Internalize env. costs • Level playing field for renewable; subsidize renewable, if external costs are not internalized + subsidize renewable to address market barriers • Sustainable Development argument • Integrated assessment; Economic, Environmental and Social

  4. Work on “what needs to be done” • Quantification of subsidies; available in ICs (mainly on-budget) and some DCs • Quantification of impacts of subsidies- qualitative and partial analyses • Recommendations • Quality information and transparency • Fiscal (taxes, EU tax harmonization, polluter pays principles) • Legal measures • Commitment from politicians!! • . • .

  5. Issues • Energy subsidy v/s other subsidies • Eg. Transport subsidy and agricultural subsidy has implications for energy use • What to eliminate and what to reform? • Eliminate “bad” subsidies? Bad economically, environmentally or socially? Can be politically good • Reform “good subsidies”? For clean energy, energy efficiency, for energy access to poor (targetted), and even for cleaner “fossil fuel” technologies • Who will be the change agents and what they need? • Targetted energy users and tax payers (who foot the bill), decision makers • Awareness and information- quantum of subsidy, where it goes, economic and environmental impacts. Its relationship to its objectives, development and welfare needs to be quantified.

  6. Who are decision-makers and what they need? • Politicians and bureaucrats • All that “change-agents" need and; • Support from them (change agents + users) • Addressing their “real concerns” • Energy security • Competitiveness (including industry relocation) • Employment- Job losses • Regional development • Social issues- access to energy, and affordability (Treatment of these issues is inadequate and unconvincing in the current literature, and may not be able to address the concerns; Eg. support to poor households) • A lack of viable alternatives to address social issues- leads to a much broader issue- governance

  7. Can one cap fit the all?

  8. Energy subsidy and global environmental pollution • Global environmental problem seen as a major issue in energy subsidy (and hence focus on fossil fuel subsidies) • The solution is other way round • GHG Emissions reductions required to stabilize CO2 concentration (60%?) • Cap on GHG emissions • ET and CDM will internalize and reflect (global) external costs • Renewables and EE will get subsidized (so called “good subsidy”)

  9. My personal take • Boils down to need for Lifestyle changes in the North (In 1998, gasoline cheaper than bottled water in the US) Governance in the South • So long that does not work- efforts to reduce subsidies (a stop-gap arrangement) (Even a real break-through in energy technology can address only energy use issues- not broader resource usage issue (SD))

  10. Thank You.

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