Reforming energy subsidies in Asia
The Joint Report to the G20 by the International Energy Agency,[1]estimates that phasing-out fossil fuel subsidies could reduce greenhouse-gas emissions by 10% in 2050 compared to the business-as-usual scenario. Elimination of these subsidies will release resources which could be put to better uses such as social protection to enable the poor to cope with higher energy prices; improving the welfare of the poor by providing them access to affordable modern energy services and reducing the health hazards they face from consumption of fossil fuels; or supporting energy efficiency and renewable energy to shift economies to a low-carbon growth path.
G-20 and APEC groups of countries have agreed to phase-out inefficient fossil fuel subsidies but have made limited progress due to concerns about their economic impacts and political economy issues. This study will examine the size and impact of fossil-fuel subsidies in selected Asian countries. Reform impacts will depend on a country’s circumstances: the extent and type of subsidies being reformed; the size of the economy; and the proportion of income spent by different households on subsidized energy. The objectives of this study are to identify and quantify the subsidies; estimate potential impacts of subsidy reform on households, industry, economy, the energy system and environmental pollution; and assess alternative safety net mechanisms to shield the poor from higher prices.
[1] G20. 2010. Analysis of the Scope of Energy Subsidies and Suggestions for the G20 Initiative. Prepared for submission to the G-20 Summit Meeting, Toronto (Canada) 26-27 June 2010. Canada