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 struggled to finance the investments needed to reinforce their networks to meet peak-winter demand. Households also had to invest in electric heaters and in replacement heating systems as cross-subsidies were phased out. The boom in direct electric heating also caused distribution companies to incur major financial losses, because they were forced to sell electricity used for direct heating in households at tariffs below those at which they were buying it from generators. The aim of both governments to privatise these regional distributors at the highest possible prices was the main reason why these cross-subsidies were removed. 4.7 Policy Implications In both countries, fossil and nuclear fuels have been subsidised much more than renewables and energy conservation and efficiency. Substantial progress has been made in removing these subsidies over the last decade, but some direct and indirect subsidies, such as large-scale support for the mining industry, remain. Moreover, prices do not reflect external negative environmental effects. While the environmental and economic effects of subsidies are fairly well understood, their impact on social welfare and employment is not as obvious due to measurement difficulties. The links between all of these effects are even more difficult to assess. Policy reform is hindered by this lack of understanding. There is strong evidence that market-based reforms, such as increased competition and enterprise restructuring and privatisation, have made industry more energy efficient and less polluting in the transition economies as a whole. These reforms have reinforced the effect of raising prices to economic levels, inducing greater allocative efficiency and reducing harmful environmental effects. A number of lessons can be drawn from these developments: • Energy-price reform has had the greatest impact in raising overall energy efficiency and promoting cleaner energy use. The biggest reductions in greenhouse-gas emissions have been achieved in the privatised industries and in the energy sector. • Energy-price reform reinforced other policy measures to increase energy efficiency. • Price reform was delayed and is still being hindered by concerns about the adverse effects on poor households. However, there is a growing recognition that this problem is better addressed through welfare programmes aimed at specific sections of the population rather than through energy pricing. • Timetables for the transition to full cost pricing should have been established to allow energy users to plan their investment decisions. In many cases, price distortions led to investments that proved to be inefficient later on as price reforms were implemented. • More attention should have also have been paid to indirect energy subsidies, such as financial support for the mining industry. 64
Energy Subsidies in the Czech and Slovak Republics The experience of the Czech and Slovak Republics in the last decade shows that piecemeal efforts to reduce and remove energy subsidies are less effective than a comprehensive strategy of subsidy reform. The need to reduce state aid and liberalise the energy market under the terms of accession to the European Union has given impetus to subsidy reform. 34 A fundamental restructuring of the whole system of public financing, including taxes, together with subsidies to energy efficiency and renewables is currently under discussion in both countries. However, reaching a political consensus is proving difficult. In addition, the coordination of energy and environmental policies is not perfect. The preparation of coherent policies must involve consultation with major stakeholders. The Czech Republic has been considering a “green budget reform” based on a proposal by the European Commission. 35 This involves increasing excise taxes on selected fossil fuels and electricity generated from them, while at the same time reducing labour taxes. Under this reform, energy taxes should meet the following criteria: • Respond flexibly to changing economic conditions. • Promote a stable and predictable economic climate. • Be implemented gradually to reduce adjustment costs. • Be transparent and politically acceptable. • Have a favourable effect on the economy as a whole. Discussions on realising this type of reform have raised a number of issues that require further analysis and discussion among political leaders. As the overall tax burden in the Czech Republic is already very high, budget neutrality remains one of the basic requirements for such a reform. But it is clear that this approach would penalise the most energy-intensive industries. Such a reform must, therefore, include some mechanism to cushion the impact on these industries without reducing incentives for using energy more efficiently and cleanly. Discussions about the tax reform stalled in 2001. The new Czech Government, which came to power in 2002, has adopted the goal of budget-neutral environmental tax reform. Progress in drawing up and implementing reforms is expected soon. The new government has entered into discussions with stakeholders from Germany on how to introduce and design an Ecological Tax Reform (ETR) and how to move towards a broader Environmental Fiscal Reform (EFR) or Green Budget Reform (GBR). 34 Nonetheless, many European governments and the Union itself continue to subsidise various energy sources. See Chapter 3 and Oosterhuis (2001). 35 EC (1997). 65
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 35 and 36: Energy Subsidies in OECD Countries
Page 49 and 50: Energy Subsidies in the Czech and S
Page 63: Energy Subsidies in the Czech and S
Page 67 and 68: Energy Subsidies in Russia: The Cas
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 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 105 and 106: Energy Subsidy Reform in Iran Figur
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 123 and 124:
Page 125 and 126:
Page 127 and 128:
Page 129 and 130:
Page 131 and 132:
Analysis of Findings of Country Cas
Page 133 and 134:
Page 135 and 136:
Page 137 and 138:
Page 139 and 140:
Page 141 and 142:
Page 143 and 144:
Designing and Implementing Energy S
Page 145 and 146:
Page 147 and 148:
Page 149 and 150:
Page 151 and 152:
Annex: Methodological Approaches to
Page 153 and 154:
Page 155 and 156:
Page 157 and 158:
Page 159 and 160:
Page 161 and 162:
Page 163 and 164:
Page 165 and 166:
Page 167 and 168:
Page 169 and 170:
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?