Energy Subsidies: Lessons Learned in Assessing their Impact - UNEP

More documents

Recommendations

Info

Energy Subsidies: Lessons Learned in Assessing their Impact and Designing Policy Reforms In general, the magnitude of the change in production levels induced by subsidy reform and the subsequent change in environmental effects depend on: • The characteristics of the support measure being removed. These might include among others, how the subsidy: Table A4: The Effect of Elasticities on Potential Emissions and Resource Use with Producer Subsidies Price elasticity of supply High Low Price elasticity of demand High Low Large Moderate to small Moderate to small Small Source: Adapted from OECD (1998). - (i) affects the marginal costs of the recipient sector relative to its competitors; - (ii) protects the recipient sector from competition by other means; - (iii) forces consumers to use the subsidised fuel; and - (iv) affects the total amount of energy consumed. • The characteristics of the recipient sector. For example, how supply and demand conditions in the recipient sector affect choices open to that sector, including substitution possibilities. • Existing and expected environmental policy. For example, how environmental regulations affect baseline emissions and resource use. • Autonomous technological and economic change. For example, how developments in the relative costs of different types of energy and other factors affect market penetration, baseline emission and resource use. The effects of subsidy removal on downstream industries may also have important economic and environmental consequences. In particular, energy-subsidy reform may lead to substitution of material inputs in industries, which could impact the economy or the environment. A 1998 study by Normann et al. investigated the potential impact of subsidy removal on the use of energy-intensive and less energy-intensive processes in the newsprint industry in Sweden. The study concluded that subsidy removal might lead to the loss of competitiveness vis-à-vis other countries, leading to a fall in energy demand by this sector and, therefore, lower emissions in Sweden. The overall environmental impact of a shift in newsprint production would depend crucially on the emissions levels from energy generation and the process used to produce the newsprint. If less energy-intensive production process were used and the energy were generated using less polluting technologies, then overall pollution would fall. Several factors determine the environmental impact of subsidy reform on downstream industries. These include the effect of a smaller subsidy, or increased taxation, on the marginal effective tax rate on energy use and the difference between the energy intensity of alternative production processes. The impact on competitiveness of reducing 164
Annex: Methodological Approaches to Analysing Energy Subsidy Reform subsidies depends on the extent to which other countries follow suit in reducing energy subsidies. These factors reinforce or counter the effects of subsidy removal. They must, therefore, be taken into account in the analytical framework. The purpose of the emissions module in an economic model is to calculate a spatially distributed (or “gridded”), emissions inventory 115 , with and without the support measure. The gridded emissions inventory provides the input to a dispersion model, which allows air pollution concentrations in an area to be calculated as a function of time and location. It also provides the basis for calculating the effects of subsidy removal on air quality. Environmental damage assessment yields information on the impact of air pollution on human health, ecosystems and buildings. The purpose of the economic assessment is to place a monetary value on the damaging effects of air pollution and the cost of environmental protection. This can be done using various methods. These include valuing losses in productivity losses or expenditures on averting damage. Another approach involves evaluating peoples’ willingness to pay (WTP), or willingness to accept (WTA) compensation for changes in environmental quality. This can be achieved by studying behaviour in similar markets where a value has been placed on environmental quality or by surveying peoples’ WTP and WTA. In practice, two main approaches have been adopted to assessing the effects of energysubsidy reform on air quality. The more sophisticated of these approaches relies on the socalled “impact-pathway” approach adopted in the European Commission’s ExternE project 116 , and subsequently applied in countries such as Brazil, Russia and China. An impact-pathway identifies the sequence of events linking the emission of a specific pollutant such as SO 2 to a specific impact such as reductions in crop yields, allowing a value on the environmental costs to be calculated. The methodology therefore proceeds sequentially through the main elements shown in Figure A3. The total costs and benefits associated with a change in the energy mix are calculated by adding up all the values associated with each pollutant. 117 Table A5 provides estimates of environmental damage for all the countries in the European Union from the ExternE project. The estimates are for one or more sites rather than national averages. As a result, most country estimates are shown as ranges. A simpler approach relies on fixed damage-cost coefficients for individual pollutants, for example in the form of euros per tonne of pollutant. These coefficients reflect the economic effects of the pollutant on some combination of human health, crops, materials and ecosystems. They are usually derived from the application of the impact-pathway approach in a specific geographical context. This approach requires far less information than impactpathway analysis, but is less flexible and transparent. Aggregate costs and benefits are calculated by multiplying the standard coefficients by changes in emission levels in a specific context. In analysing the effects of reforming energy subsidies, the geographical dispersion modelling that the impact pathway analysis requires will generally not be possible, so that a fixed-coefficient approach may well be more appropriate in many cases. 115 An emissions inventory is a list of all the relevant air pollutants in a geographical area, broken down by activity sector (for example, power generation, energy-intensive industries and transport). 116 See, for example, European Commission (1995 and 1999). 117 Valuation exercises such as this can only ever capture some of the benefits and costs. For example, valuation of the health effects of air pollution using the impact-pathway technique cannot capture lifestyle changes, minor physical and mental discomfort or some of the more chronic intangible effects. 165
Page 3 and 4:
© Copyright 2003 UNEP This publica
Page 5 and 6:
Acknowledgements Acknowledgements T
Page 7 and 8:
United Nations Environment Programm
Page 9 and 10:
Contents Contents Foreword 1 Acknow
Page 11 and 12:
Contents 8.2.3 Renewable Energy Sou
Page 13 and 14:
Executive Summary Executive Summary
Page 15 and 16:
Executive Summary Summary of Findin
Page 17 and 18:
Executive Summary employment in dom
Page 19 and 20:
Abbreviations and Acronyms Abbrevia
Page 21 and 22:
Energy Subsidies: Lessons Learned i
Page 23 and 24:
Page 25 and 26:
Page 27 and 28:
Page 29 and 30:
Page 31 and 32:
Page 33 and 34:
Page 35 and 36:
Energy Subsidies in OECD Countries
Page 37 and 38:
Page 39 and 40:
Page 41 and 42:
Page 43 and 44:
Page 45 and 46:
Page 47 and 48:
Page 49 and 50:
Energy Subsidies in the Czech and S
Page 51 and 52:
Page 53 and 54:
Page 55 and 56:
Page 57 and 58:
Page 59 and 60:
Page 61 and 62:
Page 63 and 64:
Page 65 and 66:
Page 67 and 68:
Energy Subsidies in Russia: The Cas
Page 69 and 70:
Page 71 and 72:
Page 73 and 74:
Page 75 and 76:
Electricity Subsidies in India 6. E
Page 77 and 78:
Electricity Subsidies in India (SEB
Page 79 and 80:
Electricity Subsidies in India rura
Page 81 and 82:
Page 83 and 84:
Electricity Subsidies in India Usin
Page 85 and 86:
Electricity Subsidies in India and
Page 87 and 88:
Electricity Subsidies in India For
Page 89 and 90:
Oil Subsidies in Indonesia 7. Oil S
Page 91 and 92:
Oil Subsidies in Indonesia Table 7.
Page 93 and 94:
Oil Subsidies in Indonesia 7.4 Econ
Page 95 and 96:
Energy Subsidies in Korea 8. Energy
Page 97 and 98:
Energy Subsidies in Korea been used
Page 99 and 100:
Energy Subsidy Reform in Iran 9. En
Page 101 and 102:
Energy Subsidy Reform in Iran Table
Page 103 and 104:
Page 105 and 106:
Energy Subsidy Reform in Iran Figur
Page 107 and 108:
Page 109 and 110: Energy Subsidy Reform in Iran The e
Page 111 and 112: LPG Subsidies in Senegal 10. LPG Su
Page 113 and 114: LPG Subsidies in Senegal and charco
Page 115 and 116: LPG Subsidies in Senegal Figure 10.
Page 117 and 118: LPG Subsidies in Senegal Effective
Page 119 and 120: LPG Subsidies in Senegal References
Page 121 and 122: Energy Subsidies: Lessons Learned i
Page 131 and 132: Analysis of Findings of Country Cas
Page 143 and 144: Designing and Implementing Energy S
Page 151 and 152: Annex: Methodological Approaches to
Page 159: Annex: Methodological Approaches to
show all

Energy Subsidies: Lessons Learned in Assessing their Impact - UNEP

You also want an ePaper? Increase the reach of your titles

Delete template?

Save as template?