Globally fossil fuel subsidies – for producers and consumers – amounting to over $300bn every year.
Fuel subsidies are often seen as a form of poverty alleviation. But blanket fuel subsidies are a crude weapon in this fight. Worse, they tend to lock developing countries into a needlessly profligate development path, heavily skewed towards fossil fuel. Energy poverty is a real problem; fuel subsidies are not the solution. They can have a particularly pernicious effect in apparently energy-rich countries.
In Nigeria, subsidies have managed to both undermine local refining (turning one of Africa’s largest oil producers into a gasoline importer) while providing an incentive for smuggling oil out of the country. Nigeria imported 75 percent of the domestic consumed petrol products from foreign countries. To press down the price on domestic market, Nigerian government had to spent billions of naira (100 naira equal one U. S. dollar ) in the first quarter alone this year on subsidizing fuel.
In Russia, artificially low gas prices for the home market leads to inefficient consumption, reducing the gas available for export, while reducing incentives for investment in new production.
There is a positive case for eliminating fossil fuel subsidies, too. If effective in promoting efficient consumption, elimination would reduce the risk of runaway global warming. A less noble but perhaps more effective argument is that if the world does eventually set a carbon price, those who use less of it will gain. Best to get the short-term pain out of the way and prepare to reap the future benefits.
The threat of withdrawing fuel subsidies is no vote-winner. But with time and counterbalancing financial measures, this obstacle can be overcome. Cutting them would release money which could be better targeted to help the poor.
If the world really wants to get to grips with reducing its dependency on fossil fuels, eliminating subsidies both in the developing and developed world – over a period of years – is a good start.
– from ft.com
If we spend $30,000 dollars in renewable power how much sustainable clean energy we could get. This will create a lot of job, that will end poverty for a lot of people.
In India, left parties are asking fuel subsidies in the name of poor. This is wrong. Please stop the agitations.