https://www.carbonbrief.org/world-backsliding-gasoline-subsidies
[links and images in on-line article]
9 January 2017 16:00
World is ‘backsliding’ on gasoline subsidies, finds study
Sophie Yeo, Carbon Brief
Taxes on gasoline effectively reduce CO2 emissions, yet they are lower
now than they were 13 years ago, finds a new study.
By increasing taxes and removing subsidies for fossil fuels, governments
provide an incentive for consumers to start using cleaner alternatives.
However, this mechanism is not being put to full use, say US scientists,
who have published their work in the journal Nature Energy.
While some countries have consistently removed subsidies on fossil
fuels, the overall trend between 2003 and 2015 was for lower taxes, the
study says.
Lack of clarity
The removal of subsidies is a high-profile issue when it comes to
tackling climate change.
Last year, G7 countries, which include the US and UK, committed to
removing “inefficient” fossil fuel subsidies by 2025. The G20 made a
similar proposal in 2009, while the World Bank has supported the
scrapping of subsidies and the introduction of a carbon tax. Several
governments have supported individually the removal of subsidies,
including New Zealand, Sweden and Argentina.
There are also large amounts of money involved. The International
Monetary Fund estimates that global fossil fuel subsidies, including
social and environmental costs, amounted to $5.3tn in 2015, equal to
6.5% of global gross domestic product.
A study from the Stockholm Environment Institute and Earth Track, due to
be published tomorrow, finds that 45% of US oil and gas fields can only
be developed profitably if they are subsidised. This highlights the role
that subsidies play in allowing otherwise uneconomic oil and gas
exploitation to go ahead.
However, despite their significance, it can be difficult to measure the
volume of global taxes and subsidies. Michael Ross, professor of
political science at the University of California Los Angeles and lead
author of the study, tells Carbon Brief:
“Some governments announce new policies, but don’t follow through, or
negate them, with hidden countermeasures. Or the policies are retracted
by the next government. Conversely, other governments will make reforms
quietly to avoid opposition.”
The scientists have calculated the changes in subsidies and taxes over
time to assess whether governments are ultimately moving in the right
direction.
The paper deals only with gasoline subsidies, as this is one of the
easier subsidies to track.
Method
To measure the global progress on implementing taxes and removing
subsidies, the authors collected local gasoline retail prices for 157
countries from 2003 to 2015. This included all sovereign states whose
populations were greater than one million in 2012 (except Cuba, Eritrea,
North Korea and Turkmenistan, for which reliable data wasn’t available).
Data was collected from national governments and other bodies, including
the European Commission, International Road Transport Union, IMF and
World Bank.
Then, the retail price in each country was compared with a global
benchmark price. When the price was higher, it meant that the gasoline
was being taxed. When the price was lower, it was being subsidised.
This method of measuring means that the subsidy figures they give are
likely a low estimate, as it doesn’t take into account what is known as
“post-tax subsidies”, says the paper.
Global results
Superficially, this yields a positive picture of global efforts to
remove subsidies and tax gasoline. Net taxes rose in 83 countries, while
they fell in only 46. The global mean value of each country’s taxation
increased by 18.9% over the 12-year period, starting at 42.8 cents in
2003 and rising to 50.9 cents.
However, this doesn’t account for the differing levels of consumption
between countries. Ross tells Carbon Brief:
“We find, surprisingly, that even though about two-thirds of all
governments having raised taxes or reduced subsidies since 2003, the
mean tax on gasoline [when weighted according to country consumption]
has been going down — largely because consumption is shifting toward
countries where petrol is subsidized or taxed at low levels.”
When countries’ subsidies and taxes were weighted according to domestic
consumption, gasoline was still facing a net tax, but the overall sum
was lower and had decreased over time. Between 2003 and 2015, it dropped
from 27.9 cents to 24.2 cents — a fall of 13.3%.
“This should be a wake up call for policymakers,” adds Ross.
Leaders vs laggards
Some nations particularly stood out, either for positive or negative
reasons. The following graph shows where each country stood in 2015
compared to its position in 2003.
Taxes on gasoline effectively reduce CO2 emissions, yet they are lower
now than they were 13 years ago, finds a new study.
By increasing taxes and removing subsidies for fossil fuels, governments
provide an incentive for consumers to start using cleaner alternatives.
However, this mechanism is not being put to full use, say US scientists,
who have published their work in the journal Nature Energy.
While some countries have consistently removed subsidies on fossil
fuels, the overall trend between 2003 and 2015 was for lower taxes, the
study says.
Lack of clarity
The removal of subsidies is a high-profile issue when it comes to
tackling climate change.
Last year, G7 countries, which include the US and UK, committed to
removing “inefficient” fossil fuel subsidies by 2025. The G20 made a
similar proposal in 2009, while the World Bank has supported the
scrapping of subsidies and the introduction of a carbon tax. Several
governments have supported individually the removal of subsidies,
including New Zealand, Sweden and Argentina.
There are also large amounts of money involved. The International
Monetary Fund estimates that global fossil fuel subsidies, including
social and environmental costs, amounted to $5.3tn in 2015, equal to
6.5% of global gross domestic product.
A study from the Stockholm Environment Institute and Earth Track, due to
be published tomorrow, finds that 45% of US oil and gas fields can only
be developed profitably if they are subsidised. This highlights the role
that subsidies play in allowing otherwise uneconomic oil and gas
exploitation to go ahead.
However, despite their significance, it can be difficult to measure the
volume of global taxes and subsidies. Michael Ross, professor of
political science at the University of California Los Angeles and lead
author of the study, tells Carbon Brief:
“Some governments announce new policies, but don’t follow through, or
negate them, with hidden countermeasures. Or the policies are retracted
by the next government. Conversely, other governments will make reforms
quietly to avoid opposition.”
The scientists have calculated the changes in subsidies and taxes over
time to assess whether governments are ultimately moving in the right
direction.
The paper deals only with gasoline subsidies, as this is one of the
easier subsidies to track.
Method
To measure the global progress on implementing taxes and removing
subsidies, the authors collected local gasoline retail prices for 157
countries from 2003 to 2015. This included all sovereign states whose
populations were greater than one million in 2012 (except Cuba, Eritrea,
North Korea and Turkmenistan, for which reliable data wasn’t available).
Data was collected from national governments and other bodies, including
the European Commission, International Road Transport Union, IMF and
World Bank.
Then, the retail price in each country was compared with a global
benchmark price. When the price was higher, it meant that the gasoline
was being taxed. When the price was lower, it was being subsidised.
This method of measuring means that the subsidy figures they give are
likely a low estimate, as it doesn’t take into account what is known as
“post-tax subsidies”, says the paper.
Global results
Superficially, this yields a positive picture of global efforts to
remove subsidies and tax gasoline. Net taxes rose in 83 countries, while
they fell in only 46. The global mean value of each country’s taxation
increased by 18.9% over the 12-year period, starting at 42.8 cents in
2003 and rising to 50.9 cents.
However, this doesn’t account for the differing levels of consumption
between countries. Ross tells Carbon Brief:
“We find, surprisingly, that even though about two-thirds of all
governments having raised taxes or reduced subsidies since 2003, the
mean tax on gasoline [when weighted according to country consumption]
has been going down — largely because consumption is shifting toward
countries where petrol is subsidized or taxed at low levels.”
When countries’ subsidies and taxes were weighted according to domestic
consumption, gasoline was still facing a net tax, but the overall sum
was lower and had decreased over time. Between 2003 and 2015, it dropped
from 27.9 cents to 24.2 cents — a fall of 13.3%.
“This should be a wake up call for policymakers,” adds Ross.
Leaders vs laggards
Some nations particularly stood out, either for positive or negative
reasons. The following graph shows where each country stood in 2015
compared to its position in 2003.
Other countries made good progress in increasing taxes over the period
measured. Ross says:
“The countries with the biggest increases were in Argentina, China, and
Malawi, surprisingly. Among the large emitters, China’s reforms were
remarkable.”
Ross, Michael L., et al. (2017) Global progress and backsliding on
gasoline taxes and subsidies, Nature Energy, doi:10.1038/nenergy.2016.201
