Featured Research

from universities, journals, and other organizations

Carbon emissions: Energy-subsidy reform can be achieved with proper preparation, outside pressure

Date:
May 5, 2014
Source:
Rice University
Summary:
Reform of energy subsidies in oil-exporting countries can reduce carbon emissions and add years to oil exports, according to a new article. Whether sold as bulk crude oil and natural gas or as retail electricity, gasoline or diesel, the major exporters of OPEC, Russia and others harbor some of the lowest domestic energy prices in the world. These fossil-fuel subsidies have allowed these countries to distribute resource revenue, bolstering legitimacy for governments, many of which are not democratically elected.

Reform of energy subsidies in oil-exporting countries can reduce carbon emissions and add years to oil exports, according to a new paper from Rice University's Baker Institute for Public Policy.

"Navigating the Perils of Energy-Subsidy Reform in Exporting Countries" was authored by Jim Krane, the Wallace S. Wilson Fellow for Energy Studies at the Baker Institute, who specializes in energy geopolitics. The paper reviews the record of energy-subsidy reforms and argues that big exporters should reduce energy demand by raising prices, and that this can be done without undermining legitimacy of governments that depend on subsidies for political support.

"Removing state subsidies on energy is one of the most politically dangerous acts there is," Krane said. "No government in the world wants to antagonize motorists or raise electricity prices. But previous experience shows that with proper preparation, subsidies can be rolled back without undermining government legitimacy, even in autocracies that use these discounts to preserve popular support."

Whether sold as bulk crude oil and natural gas or as retail electricity, gasoline or diesel, the major exporters of OPEC, Russia and others harbor some of the lowest domestic energy prices in the world. These fossil-fuel subsidies have allowed these countries to distribute resource revenue, bolstering legitimacy for governments, many of which are not democratically elected, Krane said.

"However, subsidy benefits are dwarfed by the harmful consequences of encouraging uneconomic use of energy," Krane said. "These effects include wasted resources, foregone revenue and outsized emissions of carbon dioxide as well as local pollutants such as sulfur oxides and nitrogen oxides. Now, with consumption posing a threat to long-term exports, governments face a heightened need to raise prices that have come to be viewed as entitlements."

Subsidy reform by centralized governments like those in most OPEC countries is even more difficult, since concentration of authority also concentrates the accountability of the head of state. Blame is difficult to evade -- unless the leadership can blame outside pressure.

"A vociferous international outcry or pressure from a foreign government or non-governmental organization can provide political cover for governments to enact unpopular measures," he said. "Lobbying by external pressure groups is useful in this sense."

Perhaps the biggest risk implied by reforms of subsidies and social contracts is the possibility of unrest and even the overthrow of governments, Krane said.

Despite the risk, energy subsidies are not untouchable. According to the International Monetary Fund (IMF), all but five of 28 substantial attempts to dismantle subsidies over the past two decades met with some success. The list of reformers includes energy exporters. Indonesia, for example, after failed attempts in 1997 and 2003, successfully raised fuel prices in 2005 and 2008.

Krane said the most encouraging example of reform efforts is that of Iran, the first country in the world to replace major subsidies with a universal cash transfer program for households. Iran's 2010 reform was welcomed by the IMF and, at least initially, by the Iranian public, while halving the world's largest energy-subsidy burden, valued at around $100 billion or a quarter of the 2010 gross domestic product.

Done properly, ending subsidies can add years to the longevity of exports, while keeping global markets supplied and reducing both local pollution and carbon dioxide emissions, Krane said. Mismanaged, eliminating "entitlements" can undermine government legitimacy and trigger unrest. "In the Middle East, where pan-Arab revolts have toppled four governments and left a fifth in civil war, caution remains acute," he said.

Keeping prices low offers a short-term benefit, but in the longer run, giveaways of chief export commodities undermines exports, which invites greater economic and political trouble. Oil exporting regimes depend on export revenues to maintain control.

"Policymakers in exporting states understand that reforming subsidies is their best strategy for preserving political power, since export revenues are a key resource for political stability," Krane concluded. "Thus, constructive external criticism can provide regimes with persuasive tools for swaying public opinion of the need for higher prices and reduced demand."

Report: http://bakerinstitute.org/research/navigating-perils-energy-subsidy-reform-exporting-countries/


Story Source:

The above story is based on materials provided by Rice University. The original article was written by Jeff Falk. Note: Materials may be edited for content and length.


Cite This Page:

Rice University. "Carbon emissions: Energy-subsidy reform can be achieved with proper preparation, outside pressure." ScienceDaily. ScienceDaily, 5 May 2014. <www.sciencedaily.com/releases/2014/05/140505130544.htm>.
Rice University. (2014, May 5). Carbon emissions: Energy-subsidy reform can be achieved with proper preparation, outside pressure. ScienceDaily. Retrieved October 21, 2014 from www.sciencedaily.com/releases/2014/05/140505130544.htm
Rice University. "Carbon emissions: Energy-subsidy reform can be achieved with proper preparation, outside pressure." ScienceDaily. www.sciencedaily.com/releases/2014/05/140505130544.htm (accessed October 21, 2014).

Share This



More Matter & Energy News

Tuesday, October 21, 2014

Featured Research

from universities, journals, and other organizations


Featured Videos

from AP, Reuters, AFP, and other news services

Gulfstream G500, G600 Unveiling

Gulfstream G500, G600 Unveiling

Flying (Oct. 20, 2014) Watch Gulfstream's public launch of the G500 and G600 at their headquarters in Savannah, Ga., along with a surprise unveiling of the G500, which taxied up under its own power. Video provided by Flying
Powered by NewsLook.com
Japanese Scientists Unveil Floating 3D Projection

Japanese Scientists Unveil Floating 3D Projection

Reuters - Innovations Video Online (Oct. 20, 2014) Scientists in Tokyo have demonstrated what they say is the world's first 3D projection that floats in mid air. A laser that fires a pulse up to a thousand times a second superheats molecules in the air, creating a spark which can be guided to certain points in the air to shape what the human eye perceives as an image. Matthew Stock reports. Video provided by Reuters
Powered by NewsLook.com
Hey, Doc! Sewage, Beer and Food Scraps Can Power Chevrolet’s Bi-Fuel Impala

Hey, Doc! Sewage, Beer and Food Scraps Can Power Chevrolet’s Bi-Fuel Impala

3BL Media (Oct. 20, 2014) Hey, Doc! Sewage, Beer and Food Scraps Can Power Chevrolet’s Bi-fuel Impala Video provided by 3BL
Powered by NewsLook.com
What We Know About Microsoft's Rumored Smartwatch

What We Know About Microsoft's Rumored Smartwatch

Newsy (Oct. 20, 2014) Microsoft will reportedly release a smartwatch that works across different mobile platforms, has a two-day battery life and tracks heart rate. Video provided by Newsy
Powered by NewsLook.com

Search ScienceDaily

Number of stories in archives: 140,361

Find with keyword(s):
Enter a keyword or phrase to search ScienceDaily for related topics and research stories.

Save/Print:
Share:

Breaking News:

Strange & Offbeat Stories


Space & Time

Matter & Energy

Computers & Math

In Other News

... from NewsDaily.com

Science News

Health News

Environment News

Technology News



Save/Print:
Share:

Free Subscriptions


Get the latest science news with ScienceDaily's free email newsletters, updated daily and weekly. Or view hourly updated newsfeeds in your RSS reader:

Get Social & Mobile


Keep up to date with the latest news from ScienceDaily via social networks and mobile apps:

Have Feedback?


Tell us what you think of ScienceDaily -- we welcome both positive and negative comments. Have any problems using the site? Questions?
Mobile: iPhone Android Web
Follow: Facebook Twitter Google+
Subscribe: RSS Feeds Email Newsletters
Latest Headlines Health & Medicine Mind & Brain Space & Time Matter & Energy Computers & Math Plants & Animals Earth & Climate Fossils & Ruins